VenGrowth Capital Partners Inc. is launching the VenGrowth Traditional Industries Fund. The new labour-sponsored investment fund will provide loans to established, mid-market Canadian businesses in the traditional manufacturing and services sectors, with an aim to generate a steady flow of current interest or dividend income to the fund.

In addition, Vengrowth Capital says investors may benefit from the future growth of these businesses because the fund will typically hold equity interests alongside the loans.

The fund is 100% RRSP-eligible and available in all provinces across Canada.

The fund will invest predominantly in later-stage private businesses with projected sustainable cash flows and proven management. It will focus on investment opportunities between $3.0 million and $7.5 million in small and medium-sized private firms with enterprise values of $10 million to $50 million.

VenGrowth says that this mid-market category is an under-serviced segment of Canadian business because of the scaling back of senior lending operations by banks.

Graham McBride has been recruited as lead manager of the fund. He is an expert in mezzanine financing — the form of lending that the fund will mainly use. Graham has 17 years of experience in this field and a track record of driving substantial returns for entrepreneurs and investors alike.

“There is a huge opportunity in the mid-market of private equity,” says McBride, General Partner, VenGrowth. “Canadian banks have downsized their lending operations to the point where they have retreated from the very important mid-market segment — the heart of the Canadian business market.”

As an LSIF, the fund qualifies investors for a 15% federal tax credit on the first $5,000 invested each year. Ontario investors may receive an additional 15% provincial tax credit on the first $5,000 invested each year.

The fund is administered by Mackenzie Financial Corp., VenGrowth’s mutual fund partner and administrator.