A year ago, when the Meriwether Group launched the Hero Fund and a private lending business, the team vastly underestimated the market demand.
The group aimed to do one loan a month. Upon launching, it looked at 10 opportunities for every loan it ended up making. This spring, the number of potential opportunities jumped to 20 for every loan made.
“It’s almost like a line out the door of borrowers we are talking to,” said Jamie Shulman, co-founder and fund manager of Meriwether Group Capital.
The Hero Fund, which totals about $12 million, lends to small and medium-sized businesses that need $500,000 to $5 million, a sector of the market the team considers underserved.
The loans are typically bridges for businesses with average durations of about 18 months. Target companies are profitable and generate between $2 million and $75 million in revenue, as opposed to startups or pre-revenue.
While there are other options for private lending and venture debt, they typically focus on larger amounts, said Shulman.
“What we also didn’t think about, but have observed and are really proud to have helped is that a fair number of these businesses are either in smaller communities that are not served, geographically, by their local bank,” he said, adding they have loans in Hood River, Ashland and Salem.
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The Hero Fund doesn't target 20% or 30% returns. It instead looks to preserve capital and provide an income stream through quarterly returns with a 10% target.
So far, the group has hit that goal.
The fund has made about a dozen loans. It is industry-agnostic, with most of the portfolio so far sitting in the Pacific Northwest.
“Our starting point of a discussion with a potential borrower is with two very basic questions: How do you make money? And how are you going to pay us back?,” said Shulman. “And if we can understand both of those questions, there is likely a path to a ‘yes.’ If we can’t understand the answers, then forget it we’re not moving forward.”
As a result, the fund tends to avoid tech and explore consumer products or food and beverage businesses.
Companies in the loan portfolio include Vancouver-based Pearl West Restaurant Group, Salem-based Sackcloth & Ashes and Coos Bay-based Face Rock Creamery.
