3/22/2005— Three Chicago-based lending professionals have teamed up with financial services holding company Marquette Financial Cos. to launch a new senior lending firm targeting smaller businesses.

“There are a lot of great businesses, great management teams, and great private equity sponsors in the lower end of the middle market that don’t get enough consistent attention from leveraged capital providers,” said Joseph Gaffigan, the president and chief executive of the new firm, called MFC Capital Funding Inc. “There are plenty of opportunities for us to grow in this market segment.”

MFC also believes that at the high end of the market an ample supply of cheap financing is helping to push up purchase prices and to load mountains of debt on top of companies.

“There is still some relative sanity in the lower end of the middle market,” Gaffigan said. “The risk returns are more appropriate.”

Gaffigan, along with chief operating officer Christopher Randall, hails from Fifth Third Bank, Chicago. Managing director Edward Ryczek was previously with One Mezzanine Capital Corp. formerly known as Bane One Mezzanine Corp.

Gaffigan said that while the firm will focus on companies with revenue of less than $100 million, target companies can have revenue of $10 million to $250 million, and Ebitda, or earnings before interest, taxes, depreciation and amortization, of $2 million to $7.5 million.

Ninety percent of MFC’s offerings will be senior debt secured against the borrowers’ assets or cash flow, with the remainder in the form of mezzanine lending. A typical borrower may need loans of $3 million to $25 million.

MFC may also invest alongside buyout firms as an equity sponsor or contribute capital to LBO funds.

The firm isn’t deploying a fund at present and has no immediate plans for an outside fund. It is getting money exclusively from Marquette, Gaffigan said.

Part of the business empire of the Carl Pohlad family of Minneapolis, Marquette manages $1.2 billion in capital. It has been expanding its commercial finance business of late; it was a big investor in Marquette Capital Partners Inc., an SBIC-backed mezzanine lender which earlier this month closed its debut fund at $78 million.

Other companies in Marquette’s commercial finance portfolio include two asset-based lenders and a mortgage provider, according to its Web site.