Episode 22: Financing Small & Lower Middle Market Businesses
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“It is important to invest alongside a private equity group that is willing to dig into it if there is a problem because you can never anticipate shocks that can happen within the business. They need to have integrity and you have to be able to trust them because of course when everything is going well, it’s easy to have a good relationship, but if any problems come up, that is the time when you really find out what it is like to work with a private equity firm. ”
About the Interview
Private equity is permeating a growing swath of the economy, including profitable smaller businesses. In this interview, Juan E. Alva explains his firm’s strategy of providing debt capital to these businesses alongside the private equity firms who invest equity capital. Operating as an SBIC fund, the firm combines capital from private investors with leverage from the U.S. Small Business Administration as part of the total loan, and coupled with creative debt facility structuring, are able to generate higher returns than would otherwise be possible as a senior lender. This interview is yet another example of the increasing breadth and creativity of credit investors and non-bank lenders who are stepping into the gap created as banks pulled back from many types of loans during the Great Financial Crisis.
Juan E. Alva
Managing Partner Pelham S2K
Juan E. Alva is a Partner of Pelham S2K, where he is responsible for sourcing, evaluating, executing, and managing investments. Previously, Juan was a Partner at Fifth Street Management, where he was responsible for originating investment opportunities and also served as the Head of Strategy and Corporate Development. In addition, Juan was a Principal in Fifth Street Management’s two SBIC funds. Prior to Fifth Street Management, he was an investment banker in the Financial Institutions and Corporate Finance Groups at Goldman Sachs, CFO of ClickServices (a wireless software company majority owned by Cisco Systems) and a senior investment banker at Trinity Capital, a boutique investment bank focused on the food and restaurant industries.
Juan earned a B.S. in Economics from The Wharton School of the University of Pennsylvania and a B.S. in Engineering from The Engineering School of the University of Pennsylvania.
