Entrepreneurs in 38 North Dakota municipalities could get a new source of funding for starting a business.
A group of communities, led by Mandan, has qualified for about $9.7 million from the U.S. Department of the Treasury to establish a revolving loan fund. People in the participating communities will be able to apply for low interest loans to help start or expand their business.
"With some of these businesses, because they're new start-up ventures, banks might see them as too risky," Mandan Business Development Director Ellen Huber said. "It (the loan fund) reduces everybody's risk. ... A lot of businesses get off the ground that otherwise wouldn't have."
Other area municipalities in the group include Beach, Beulah, Bismarck, Bowman, Carson, Dickinson, Dodge, Dunn Center, Garrison, Glen Ullin, Hazelton, Hazen, Hebron, Hettinger, Killdeer, Lincoln, Linton, Mott, New England, New Salem, Regent, Standing Rock Sioux Tribe, Turtle Lake, Underwood, Watford City, Williston and Wilton.
Each community still has to file paperwork to receive the funding. Once that is complete, a 15-member council, made up of members from the communities, will be formed to decide on loan criteria and oversee the loan fund. The lending services will be provided by the Lewis and Clark Regional Development Council.
The group has 90 days from the date of closing to have the fund up and running and all money must be committed within two years. The fund requires $10 in private investment for every $1 in federal money. The loan participation program can fund up to 50 percent of an eligible business project, but will generally fund 20 percent. Borrowers will typically have 500 employees or less and cannot employ more than 750 people.
Loans can be used for things like start-up costs, working capital, franchise fees, equipment, inventory, and the purchase, construction or renovation of a building. When one loan is paid back the money is lent again.
Mandan already has two $1 million revolving loan funds created with U.S. Department of Agriculture Rural Development money, Huber said. The two funds have helped start or expand a total of 30 different businesses.
"Those have been very helpful," she said. "This treasury program will give us the ability to assist with some larger programs," Huber said.
Nancy Phelps moved her store, Mocha & More, in October 2010 and used a loan from one of the funds to renovate the new building at 306 W. Main St. She said she found out about the loan fund from her banker.
"A lot of these older buildings need a lot of work and the bank won't give you money for the remodel," she said. "Banks are only going to cover X amount and it may not be what you need to get up and going."
Al Kuntz, owner of Hirsch Floral at 200 Collins Ave., also used a loan to expand last year.
"They were willing to work with me," he said. "This made it easier."
Bismarck City Administrator Bill Wocken said Bismarck participates in the Bank of North Dakota Partnership in Assisting Community Expansion program, but the revolving loan fund would provide another financing opportunity for new businesses.
"Anytime you have a new business in a community it adds to the economic base," Wocken said. "Those dollars spent in the local economy, they stay local. It makes the local economy more robust."
Wocken said the city decided to join so the opportunity would be there.
"We don't know if there will be one person or 100 people in line," he said. "We're hoping to spur the development of more businesses."
"We don't have a lot of business out here," said Lincoln City Auditor Melanie Kitzan.
Kitzan said a lack of commercial buildings has stifled business growth and the loan fund would give developers a better interest rate on building loans.
"We're just hoping it brings new businesses to town and gives some people some opportunities they wouldn't have otherwise," New Salem City Auditor Shian Caelberer said.
Wilton hasn't had a business loan fund in the past that City Auditor Kelly Bauer remembers.
"You never know when a community might need that kind of resource available to them," she said about the city's decision to join the loan fund. "Anything that's going to help anyone get something going at a low cost to them is always good."