Cadence | Case Study: Cadence Partners With First Emerging Market Originator

Case Study: Cadence Partners With First Emerging Market Originator

Mexico-Based Aspiria Chooses Cadence for Competitively-Priced Capital

In August, Cadence announced our first partnership with a specialty finance company based outside the United States.

Aspiria, a Mexican small and medium-sized business (SMB) lender, provides financing to SMBs through various product lines. Leveraging its own data-driven underwriting approach and partnerships with larger merchants, Aspiria is able to extend credit to businesses underserved by traditional financial institutions.

Their products vary, from short-term cash advances to medium-term mortgages. They also provide financing to the clients of larger firms, essentially becoming their external financing partners. As an example, Aspiria has partnered with Cemex, a materials company, to provide financing to that company’s SMB clients.

Unique Challenges

Mexican SMBs, similar to SMBs in other emerging market (EM) countries, tend to suffer from inadequate access to capital. Traditional banks may also be operationally inefficient and disinterested in serving small firms.

By employing data-driven underwriting procedures, a sophisticated client onboarding and portfolio management platform, and an experienced management team, Aspiria is able to provide a superior product to that of its competitors. However, like most small specialty finance companies in emerging markets, originators like Aspiria face their own challenges in raising flexible capital at competitive rates.

Providing Transitional Capital

Our partnership with Aspiria was about taking on this challenge. Cadence successfully closed on the inaugural offering of a short-term note program (STNP), benefiting both Aspiria and our note investors. This Series 4-A note closed on September 6, 2019 and raised $500,000, providing our retail investors with private credit exposure that would otherwise be unavailable to them and enabling Aspiria to make additional loans.

You can see a full list of our previous deals here.

Funding Solid Originators

While partnering with Cadence gives EM originators like Aspiria access to a new source of competitively-priced capital, the advantages go far beyond cost. Our STNP also allows partners to adjust the timing and amount of capital borrowed at regular intervals, offering the flexibility needed to adjust to local demand and changing credit conditions.

These are the hallmark benefits we deliver to our deserving originator partners, whether they are located in other EM countries, the United States, or elsewhere.

Hypothetical Note Program for an EM Based Originator Partner

Hypothetical Note Program for an Emerging Market Based Originator Partner

Globalizing Investors’ Portfolios

Successfully structuring and placing our Series 4-A notes with investors marks another milestone for Cadence, especially considering that working with a foreign originator introduces new legal and tax considerations. But Cadence successfully cleared those hurdles and ultimately provided investors with the same investment experience as if it was a U.S.-based originator. Additionally, the note also revealed strong demand for EM assets on the part of our US-based investors.

By launching more comparable STNPs in the coming months, Cadence expects to provide our growing retail and institutional investor base with more access to EM private credit assets.

Daniel DeMatos
Author
Daniel DeMatos
Securitization Analyst
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