Appalachian Regional Commission (ARC) Federal Co-Chair Earl F. Gohl announced today the creation of Appalachian Community Capital (ACC), a new central bank for development lenders that will increase the availability of capital to small businesses in the 13-state Appalachian Region. Gohl made the announcement at the Clinton Global Initiative’s CGI America conference with Ray Moncrief, ACC board chair and executive vice president and chief operating officer of the Kentucky Highlands Investment Corporation, and Donna Gambrell, director of the U.S. Department of the Treasury’s Community Development Financial Institutions Fund. The Clinton Global Initiative considers the ACC initiative vital to economic development efforts in Appalachia.
Shaw Canale, CEO of Mountain BizWorks, serves on the board
of Appalachian Community Capital. “We could not be more pleased to be a part of
this important capital intermediary directing funding into our Appalachian
communities,” says Canale. “Mountain BizWorks’ participation in the founding
and oversight of this initiative translates into a greater ability to make more
loans to small business in the western North Carolina counties we work in.”
Industry analysis indicates that over the past several
years, banks across the United States have instituted tighter credit
requirements for small-business lending, reduced their appetite for risk, and
become more sensitive to concentrated credit exposures. When combined with a
challenging economic environment, these conditions have left many financially
sound businesses seeking new sources of capital.
For growing businesses in Appalachia, finding capital is
even more difficult, as a number of systemic factors have limited the sources
of available capital. According to recent studies, Appalachian small businesses
receive only 82 percent of the loans of their comparable counterparts
nationally, while businesses in Appalachia’s economically distressed counties
receive less than 60 percent of the loans of their national counterparts.
To address this gap, ARC, along with participating community
loan fund partners in the Region, has committed to establishing a new source of
funding for development lenders and helping capitalize it with $42 million over
the next 24 months. This new central bank is expected to leverage $233 million
of private bank capital and help create 2,200 jobs.
Appalachian Community Capital will raise grant capital and
leveraged debt from funding sources not available to or underused by individual
funds, such as regional and national banks, utilities, and national
foundations. Because this new central bank will pool the capital needs of all
its members, it can attract investors that are seeking to place larger amounts
of money.
Gohl underscored the innovative nature of this development
lending initiative: “It will bring together the Appalachian capital financial
institutions to raise capital as a group,” he said, noting that “it is better
do things together than individually on our own.”
Moncrief said the community development financial
institutions that practice in Appalachia are grateful to Gohl and ARC for their
leadership in the formation of Appalachian Community Capital: “This will be a
very valuable source of capital for Appalachian businesses that struggle to
access funding,” he said.
ARC will make a lead investment of $3.45 million in equity
and operating support, and with its regional partners will help raise an additional
$39 million in debt and equity from bank, philanthropic, and public investors.
The Commission has significant experience in supporting
development finance institutions in the Region. In addition to its lead
investment in Appalachian Community Capital, ARC will contribute a range of
resources to the bank’s development, including assistance with creation of a
business plan, with formation of the entity as a not-for-profit organization,
and with raising capital from bank and foundation investors.
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