In emerging markets most commercial banks provide working capital only to well collateralized, later stage companies. In many emerging markets, credit from commercial banks is unaffordable, inflexible, or unavailable, and companies are deemed as under-collateralized and too high risk. Only a small subset of highly specialized lenders and mezzanine financing firms are providing working capital for early-stage and emerging growth businesses. And the vast majority of these lenders limit the lending to very high-growth businesses.
For the most part, however, working capital and venture debt-like solutions are reserved for middle market companies with established trailing revenues, high margins, and near or post profitability. Funding for early stage and emerging-growth companies has largely been ignored by commercial banks, in particular those in emerging markets, despite various third party intermediaries providing credit enhancement and other forms of risk mitigation support.