Providence Investment Partners, a Dallas-based boutique firm, is in the market to raise a new fund to provide junior capital to lower-middle-market companies in Texas and the US Southwest, according to a March regulatory filing and a person familiar with the fundraising.
The firm aims to satisfy a growing demand for non-dilutive capital from asset-light small businesses—those that own fewer physical assets but are richer in intangibles, such as human capital, IP and contracts. The fund was launched this year by Jay Turner and Kevin Glomb—both of junior capital provider Dos Rios Partners—and Summit Partners alum Chris Crawford.
Providence, which started raising capital for Providence Investment Partners I last year and collected $45.5 million in its first close, according to the filing, will target founder-owned and closely held companies in the consumer, healthcare, business services and light manufacturing sectors. The typical investment size will be in the range of $5 million to $15 million.
Providence seeks to provide unitranche debt, mezzanine debt and preferred equity investments to companies with EBITDA between $2 million and $10 million, according to its website.
Compared with larger peers, small companies typically find it more challenging to access credit financing. That trend has been exacerbated by recent interest rate hikes, which dampened banks’ appetite for risky loans.
Some private investment firms stepped in to fill that financing gap. In October, LongWater Opportunities, a lower-middle-market private equity firm, launched a private credit business to provide senior and junior debt to companies with EBITDA of $3 million to $15 million.
More recently, Principal Asset Management launched an interval fund primarily targeting private credit loan investments for borrowers with $5 million to $15 million in EBITDA, PitchBook reported.
Because the Providence fund is structured as a Small Business Investment Company, it is eligible to borrow up to twice the amount of private capital it has raised, which would give it access to nearly $150 million in investable capital. Its targeted investors include high-net-worth individuals, family offices and funds of funds.
Providence declined to comment on the fundraising.
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