EFA Group, an Asian fund primarily involved in commodity trade finance, has opened a new fund for receivables and supply chain finance.

The fund will focus on new SMEs in Asia, making loans with 30 to 180-day tenors, in sectors including IT, media, pharmaceuticals and electronics. The company expects the fund to deploy a financing turnover of US$300mn next year.

Rohit Goyal, deputy head of receivables and supply chain finance at EFA Group, tells GTR that the deal size will range from US$500,000 to US$10mn, with the ability to scale up depending on the credibility and track record of the buyer. The fund targets annual net returns of between 6 and 8% (leveraged) to investors.

The deal origination process, including screening, credit analysis and due diligence, will be performed by the investment team in Singapore, with support from origination offices in Dubai and Geneva. The initial targets markets are in Southeast Asia and India.

Funds are not uncommon in trade finance in Asia, but they mostly stick to the commodities space, which is generally easier to fund on a deal by deal basis. However, EFA is one of the region’s more established funds. Last year it financed more than US$2bn of trade flows with more than US$900mn-worth of assets deployed on the secondary markets.

Goyal says that they decided to launch the new fund now because of the gap in trade finance in the region (which the Asian Development Bank puts at US$1.6tn), while at the same time, companies are being stretched by their customers to provide longer credit terms.

He explains: “Other forms of financing such as receivables financing with recourse and supply chain finance, or payables financing, supplement the volumes needed by SMEs. The trade finance gap in developing Asia represents a tremendous opportunity for alternative lenders like EFA to provide financing to SMEs while achieving the scale to offer proper diversification to investors.”

Goyal says that through working with mid-market companies in the commodity sector for more than a decade, several opportunities have arisen to finance non-commodity companies, which also helped them decide to launch the fund this year.