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Monday, June 17, 2013

Appalachian Regional Commission creates new development bank to fund small-business loans

The federal Appalachian Regional Commission is creating a bank that will provide funds to lenders in the region who make loans to small businesses that will foster economic development. Appalachian Community Capital will get $42 million and "is expected to leverage $233 million in private bank capital and help create 2,200 jobs," an ARC press release said. The agency said it will chip in $3.45 million in equity and operating support, will help raise 39 million in debt and equity. The project was announced at the closing session of the Clinton Global Initiative in Chicago. CGI "considers the ACC initiative vital to economic development efforts in Appalachia," the release said.

U.S. banks "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," ARC said. "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."

The bank will be a valuable resource for Kentucky Highlands Investment Corp., a venture-capital firm that focuses on southeastern Kentucky. “There’s a stigma in Appalachia that says, ‘You’re profoundly rural, you’re profoundly uneducated and you’re remote, and we’re not going to spend the time to get in there and provide you the financing,’” said Ray Moncrief, executive vice president and chief operating officer of the firm, told Vicki Smith of The Associated Press, who noted how KHIC's helped Mike Hurley of London, Ky., convert his metal-stamping business "into a top-tier supplier of satellite dishes." (Read more)

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