Seeking a vehicle for financing small businesses, New York's Emigrant Savings Bank has established its own venture capital fund.
The $6.5 billion-asset thrift has allocated $150 million to create the fund, which will invest in emerging companies that typically do not qualify for bank loans. The fund, operating as Emigrant Capital Corp., will target businesses with annual revenues of $5 million to $200 million.
"Emigrant is filling a void in the market left by larger banks moving to larger deals," said Gilbert S. Stein, vice chairman of the thrift and president of the new capital corporation.
The new venture is a bit of a departure for Emigrant, which has traditionally stuck to more conservative mortgage lending.
Nevertheless, Mr. Stein said Emigrant will be very selective about the companies it finances. "In terms of risk, we expect to be on the more conservative side," he said.
Emigrant is entering the venture capital arena at a time when small- business demand for cash is at an all-time high.
According to the accounting firm PricewaterhouseCoopers, venture-backed investments hit a record $4.3 billion in the first quarter, a 41% jump over the same period in 1998.
Emigrant, the fourth-largest thrift in New York, has hired the boutique investment bank Courtney Group to manage the fund.
Thomas W. Courtney Jr., president of the Manhattan firm, said he will consider financing only companies that have shown positive cash flow. Investments, to be structured as debt, equity, or mezzanine financing, are likely to range between $2 million and $20 million.
Emigrant Capital has been licensed by the Small Business Administration as a small-business investment company. Unlike banks and thrifts, investment companies are allowed to directly invest in other commercial businesses.
Nationwide, banks and thrifts own nearly 100 small-business investment companies.
Emigrant is the second New York thrift in a week to establish a venture capital arm. Troy Savings Bank, with $846 million of assets, launched T.S. Capital Corp. last week to invest in small businesses in upstate New York.