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Financing funds: Funds fill the finance gap

Mid-caps starved of operational and growth capital have new lenders.

As banks have shut down their lending activities, hedge funds have stepped in to the fill the financing gap.

A growing number of hedge funds are branching into offering financing to small and medium-sized companies in need of funds. NIR Group, which oversees approximately $7 billion across alternative investments, real estate, commodities and structured finance strategies, launched a financing fund in October. The Haverstock fund will make short-term direct investments in, and provide alternative financing solutions to, mid-cap public companies seeking operational and growth capital.

"The landscape has changed," says Corey Ribotsky, founder and managing member of the NIR Group. "There are fewer players left to loan money, and of those remaining, few want to loan money. It leaves mid-cap public companies out in the cold, and opens the door to lots of strategies like asset-based lending or other financing strategies."

Laurus Capital Management and its affiliates have been running asset-based lending as a strategy since 2001 and now have about $1.6 billion in assets under management in several funds. In June 2007, the firm launched its Valens Fund, which offers financing primarily to publicly traded, micro cap companies. "Nobody likes to gain and prosper at the misfortune of others, but the current environment is the perfect storm for our strategy.

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