Regional lending program provides gap financing

The Ozarks Regional Community Development Corp. is designed to serve the same 10-county region as the Ozarks Regional Economic Partnership, a program that works to promote regional cooperation and economic development. (See box at right.)

“Basically, our purpose is to promote and market the region,” said Allen Kunkel, manager of regional development for the Springfield Area Chamber of Commerce. Kunkel’s duties also include working with OREP. He noted that the Ozarks Regional CDC is a separate for-profit corporation that operates in collaboration with OREP and the Springfield chamber.

Success story

The concept behind the ORCDC isn’t new; the lending program is modeled after the Springfield Finance and Development Corp., a 10-year-old program that has been used in the rejuvenation of downtown Springfield.

SFDC comprises a network of banks providing loans and equity to entrepreneurs who have solid business plans. Loan amounts have varied from $5,000 to $75,000. Loans are awarded based on a geographic region generally defined as center-city, and with the expectation that the venture receiving funding will create jobs and commerce in the city of Springfield.

“That’s been a very successful program,” said SFDC Treasurer Brian Fogle, who also is executive director of the Great Southern Community Development Corp. “We made about 30 loans for a total of $1.6 million, created about 200 jobs and leveraged another $7 million in the last nine years. And those were a lot of businesses that probably wouldn’t have been able to open because of just missing that gap.”

Among the businesses that benefited from SFDC funding are Agrario, Patton Alley Pub and Artworks.

Now Fogle and Kunkel are applying the same model throughout the region.

“We saw the success with (the SFDC) and saw the need to do something more on a regional basis,” Fogle said. “Allen Kunkel and myself sort of were the founders of Ozarks Regional CDC and have remained on the board since we started.”

Increasing interest

Business interest in the regional CDC – comprised by banks and community entitites – has been somewhat slow; only two businesses – Jordan Cash Register in Springfield and Downhill Bikes in Branson – have received funding.

Robert Mastromarino used a $20,000 loan from the ORCDC to purchase Jordan Cash Register in 2005.

“We would not have been able to purchase this business without the loan,” he said, noting that he would recommend the program to other businesses. “It was painless.”

The maximum loan amount available through the ORCDC is $50,000. For both SFDC and ORCDC, the interest rate for the gap financing is generally one-quarter point below prime rate, which was at 8.25 percent on Nov. 8, Fogle said.

Eligible applicants include existing small businesses, startup companies and entrepreneurs who wish to purchase an existing business.

“We’re trying to get the word out about what we’ll look at,” Kunkel said. “The ideal applicant is a startup or small business that’s looking to expand, that can get a partial loan from an existing lender, but because of credit rating or lack of experience, or whatever it may be, there’s a gap that they can’t quite meet, and hopefully we can step in and fill that gap up to $50,000.”

Neither Kunkel nor Fogle are worried about the long-term success of the ORCDC; Fogle noted that with the SFDC, the borrowers were in a more concentrated area. With the larger region served by the ORCDC, it will take longer to generate interest – but that will get easier as more loans are made.

“Obviously we need to do a lot more projects,” Kunkel said.

About the Ozarks Regional Economic Partnership

OREP is aimed at economic development within a 10-county region comprising Barry, Christian, Dade, Dallas, Greene, Lawrence, Polk, Stone, Taney and Webster counties. There are 68 participating entities – the counties, 34 cities and 24 chambers of commerce. [[In-content Ad]]