Miami Company That Would Finance Small Businesses Halfway To Fundraising Goal
Written by Frank Norton on June 5, 2003
By Frank Norton
Banyan Mezzanine Fund, a new Miami company that hopes to provide financing to small businesses in the Southeast, said it is halfway to its goal of raising $70 million in startup capital.
The company has amassed more than $35 million in private and public capital and plans to reach its goal by the end of August, said managing director James W. Davidson. Banyan has been raising funds for about a year.
Banyan plans to provide mezzanine financing – a combination of debt and equity capital – to companies in the Southeast that demonstrate annual revenue from $5 million to $100 million.
Mr. Davidson said small-business financing in Florida has been severely underdeveloped for the past decade. Economic uncertainties in the past three years, he said, has further turned lenders away from smaller ventures, making it tough for small businesses to finance growth.
"Banks all over the country are very tight with lending, so even small companies that are doing well have a hard time getting capital," he said.
After a company maximizes its bank debt, it can seek mezzanine funding from private equity firms. In most cases, the company must borrow at a higher rate than banks offer and issue warrants to the lender that are convertible into common stock.
Mr. Davidson and Florida Venture Forum officials said Banyan is the first small-business investment company in Florida to win backing from the US Small Business Administration. The SBA, according to Mr. Davidson, will match $1 for every $2 Banyan raises.
He said that while there are about 400 small-business investment firms nationwide, there are none in Florida partly because there are few manufacturing and technology companies in the state. "Tourism and real-estate companies have been well-recognized by investors here, but technology has not," he said.
Mezzanine lending is becoming more popular because bank-lending practices have become more stringent, said Steve Lux, chairman of Florida Venture Forum and a director with Stonehenge Capital Corp., a small-business investment firm in Tampa.
"Bankers’ appetite for enterprise lending has dropped significantly, so you could say financing has become more expensive," he said. "But we’re really just cycling back to the pre-Internet boom lending days.
"I think there’s again an exciting opportunity for technology-based companies in Florida if they can get financing," he said.Details: Banyan Mezzanine Fund, (305) 250-4681.