There are many factors that come into play when starting or expanding a business, but the foundation of any business plan is funding. Getting a loan can be an intimidating or lofty prospect for some; however, Montana West Economic Development has helped dozens of local businesses do just that.
The MWED revolving loan fund is a resource that is gaining some attention around the valley, MWED vice president of finance Tina Oliphant said last week.
It’s a relatively simple idea: a 12-person committee, made of local bankers, business owners, insurance people, and others, takes a look at loan proposals, and if they decide to fund them, use money in a revolving program.
This means that when the loan gets paid back, the money goes back into the fund, to be loaned out to a different business.
Oliphant, who is the revolving fund program director, said the idea behind the program is to get businesses going, and to help them along the way. It’s not just about the dollars and cents, she said; each business owner or founder has the chance to stand before the revolving loan committee and present their ideas and reasons behind requesting the loan.
“There’s a lot more time spent to understand the project and the background,” Oliphant said. “It’s not all about the numbers.”
But if you’re going to look at the numbers, the revolving loan program has an impressive track record. In 2011, the fund approved $1,034,000 in loans for nine projects; those numbers fell to seven projects totaling $721,000 in loans in 2012.
However, the loans nearly quadrupled in 2013, with $2.74 million approved for 15 projects.
At this point, if all the loans were fully drawn, MWED would have $4.4 million out there, Oliphant said.
Money for the revolving loan program comes from different state and federal programs, including money earmarked for economic development in the Community Development Block Grant program. In many cases, to qualify for federal funds, a proposal must demonstrate that it can create jobs.
Oliphant attributes 2013’s unexpectedly high numbers to a variety of factors, such as more people learning about the loan program, and confidence in the growing economy.
There are also high expectations for 2014, she said. So far this year, the MWED revolving loan fund has received $800,000 in loan requests, all of which have potential for approval.
“If we’re already looking at $800,000, we’re hopeful for another $2 million year,” Oliphant said.
Don Bennett, president of Freedom Bank in Columbia Falls, is part of the loan committee at MWED. He said the program often serves as a financial linchpin for businesses, whether they are just starting out or looking to expand in a hurry.
Sometimes, a business might need “gap funding,” he said, which is help getting the down payment together required for a bank loan.
“The beauty of the program no matter what the funding is, is that it’s a little bridge,” Bennett said.
Once the business is able to get the down payment together for the bank, they are usually on their way, he said. Sometimes they fail, but other times they succeed and grow, creating more jobs out of the seed funding provided early on.
“It’s fun to watch,” Bennett said. “That’s the best part of my job.”
Other times, the revolving fund can pay for major projects. Oliphant said loans have ranged from $25,000 to $450,000, and many of them have paid off.
Bennett noted that as the program director for MWED, Oliphant screens the projects that make it through to the committee, and she has a good eye for potential successes.
Oliphant said that in the last four years, MWED hasn’t had a problem loan from anyone the revolving loan has worked with.
Another unique aspect of the revolving loan program is that it isn’t regulated like other financial institutions, she said, so MWED can work with the client to restructure the loan or figure out best methods of payment.
Often, MWED will help potential business owners hone their business plans, coming up with realistic proposals and ways to pay back the loan. About 30 percent of the time, Oliphant said, the businesses get successful enough to restructure their loan with a bank, and the bank pays off the revolving loan money, freeing it up for someone else.
“The point is to get these projects going and work with them along the way,” Oliphant said.
For more information about the Montana West Economic Development revolving loan program, call 406-257-7711 or visit www.dobusinessinmontana.com.
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