Nov 14, 2020

Partnerships and the pull factor: The EquitiesFirstTM approach to international expansion

Over nearly two decades in business, EquitiesFirstTM has evolved rapidly as an enterprise, in line with the rising demand globally for innovative and efficient sources of capital. From our roots in Indianapolis, we have extended our presence to 12 key financial centers worldwide, creating a network that spans all major regions.

Much of this growth in the last few years has been concentrated in the dynamic economies of East Asia. Even as the world grapples with the pandemic and an uncertain economic outlook, we continue to look for opportunities to bring our solutions to investors and borrowers in currently underserved markets.  

As a fast-growing company and provider of much-needed funding to individuals and businesses, we are often asked how we choose the markets we expand into, and where is next on our radar. While there are many considerations that go into these decisions, our approach to expansion is based on two key principles: what we call the ‘pull factor,’ and quality over quantity.  

The pull factor means that rather than rushing to enter a new market based on its potential size or economic conditions, we focus on building our capabilities where we are already, and go where our relationships take us.  

By enhancing our networks and expertise in existing locations, we see more repeat business and referrals, and our reputation grows. Borrowers begin to refer us to contacts in other jurisdictions, who will inquire whether we can offer a similar lending model in their markets. A few requests for transactions in a certain jurisdiction are all that it takes for us to begin to familiarize ourselves with the market environment, and to evaluate the feasibility of setting up a dedicated presence. In this way, expansion into the new market is an organic process, and we hit the ground running.  

A balanced pursuit of growth

Quality over quantity is a reminder that expansion is never an end in itself. Our ultimate goals are to extend our solutions to more investors and businesses that need them, and to grow sustainably as a business. That means we evaluate the decision to enter a market carefully, weighing factors such as demand and regulatory conditions.  

Like any responsible investor, we prize markets that are efficient, liquid and well-administered, with a high degree of transparency. In some jurisdictions, regulations around the transfer of shares may impact our ability to engage in the type of transactions we have perfected through the years. In such cases, we will typically hold back until we are in a better position to deliver value to borrowers. Regardless of the regulatory backdrop, we always work closely with legal experts to ensure any local deals or operations are entirely compliant with domestic and international law.  

We also recognize that equity-backed lending is still relatively new to many regulators and borrowers alike, and that expansion needs to be accompanied by education. Potential borrowers may be unfamiliar with how our approach differs from margin lending. That makes it important that we educate on how our transactions optimize risk management as well as borrower and lender interests.  

Regulations can and do change as authorities become more familiar with equity-backed loans and how they can address critical funding gaps. In some markets, we play an active role in expanding the range of liquidity solutions available by working under the supervision and in accordance with the rules of local regulators and institutions. One such example was the United Arab Emirates where in 2018 we became the first and only entity authorized by the Dubai Financial Market to offer repurchase (repo) transactions.[1]

Particularly in our industry, when it comes to building understanding, there are no shortcuts. It requires a track record of successful transactions, and strong relationships. That is why when we do decide to enter a market, we do so with a high degree of commitment, and a long-term vision.  

Disclaimer

The foregoing is intended solely for qualified, professional investors, as may be required by law, and is not intended for, and should not be used by, persons who do not meet the relevant requirements. Information provided herein is for information purposes only and does not constitute an offer to sell (or solicitation of an offer to purchase) the securities or investments referenced herein, or provide any particular advisory services (“Offer”). Any Offer shall only be made through the relevant offering or other documentation which sets forth its material terms and conditions. The foregoing does not provide or purport to provide investment advice and has been prepared by Equities First Holdings, LLC and its subsidiaries (together, “EquitiesFirst”) based on or derived from sources EquitiesFirst reasonably believes to be reliable.  EquitiesFirst has not independently examined or verified the information provided herein and no representation is made that it is accurate or complete. Opinions and information herein are subject to change without notice. Where figures refer to simulated past performance, that past performance is not a reliable indicator of future performance.


[1] https://www.zawya.com/mena/en/press-releases/story/Equities_First_Holdings_receives_DFMs_approval_as_the_first_registered_Repo_buyer-ZAWYA20180429125403/