Regional Development Co. to launch new capital fund for small businesses
The Regional Development Co. hopes to provide fledgling entrepreneurs with enough money to push their dreams across the finish line.
The RDC, a nonprofit partnership of public and private lenders with a history of advancing nearly $1 billion of capital investment to small businesses, is launching the Northwest Indiana Regional Growth Fund later this year.
Erica Dombey, RDC’s president and executive director, said it will support the Region’s underserved markets and disadvantaged rural and inner-city communities.
“We are into economic development and revitalization of a community in need,” she said.
The fund will serve enterprises from Lake, Porter, La Porte, Newton, Jasper, Starke and Pulaski counties.
Indiana Regional Development Authority CEO Sherri Ziller, Northwest Indiana Forum CEO Heather Ennis, NWI Regional Planning Commission Director Ty Warner, Michigan City Mayor Angie Nelson Deuitch and Lorri Feldt, director of the Northwest Indiana Small Business Development Center, are some of its key supporters.
“It’s about offering opportunities to small businesses that aren’t quite up to the standards that banks use for conventional loans,” Feldt said.
Edwin Buswell, executive director at the Kankakee Iroquois Regional Planning Commission, serves on the growth fund’s board.
“There are a lot of good ideas that just can’t find the funding because there isn’t much active capital in our rural areas,” said Buswell, whose organization serves Newton, Jasper, Pulaski and Starke counties.
Dombey said companies that will benefit from Transit Oriented Districts are one target of the fund.
There are a lot of good ideas that just can’t find the funding because there isn’t much active capital in our rural areas .”
“I have my heart set on TODs from Michigan City to Hammond,” she said.
TODs are expected to attract new business opportunities around the double-tracked South Shore corridor. The strategy integrates mixed-use with high-density development around public transit stops for walkable communities.
“We already are talking to rural manufacturers who I’d really like to see bring in decent paying jobs and help all those areas grow and flourish and keep their people in Indiana,” Dombey said.
The RDC has a portfolio of over 800 Small Business Administration 504 loans that have funded real estate and business equipment purchases since the 1990s.
“We can finance almost any for-profit business, and they have run the gamut from a chicken farm, hotels and manufacturers,” but Dombey added SBA 504 loans can’t cover many associated business expenses.
“And sometimes a bank can’t structure a loan to cover those because they are heavily regulated and can only do a certain amount of debt service coverage,” she said.
Michael Schneider, a senior vice president at Wintrust Commercial Banking and an RDC growth fund board member, offered an example.
“Let’s say we have a $1 million project, and the borrower has only $200,000 in capital,” he said. “A bank may like the project but can only lend $700,000 because there is risk beyond the safety parameters of what the bank can do responsibly in the name of its depositors and shareholders.
“So, we are left with a $100,000 gap. That is where the growth fund comes into play, as a secondary loan behind a conventional loan.
Schneider said a growth fund loan-review committee will ensure applications are fiscally prudent. Dombey said the RDC will be careful to avoid “garbage loans.”
Schneider said the growth fund will act as temporary financing.
“If the project stabilizes 24 or 36 months down the line, the partner bank may refinance the growth fund debt as a conventional bank loan and that $100,000 growth fund capital goes back to the growth fund so they can loan it out to somebody else,” he said.
Dombey said she and the RDC have been working about two decades to establish a growth fund, “but we’ve struggled to find money.”
Schneider said the success of other Indiana growth funds and Dombey’s persistent championing of the idea finally paid off with recent startup contributions from public and private entities.
“We are signing contracts to have around $15 million,” Dombey said. She hopes the funds will spawn up to 30 projects.
“A growth fund loan could cover someone who bought a building in downtown Hammond and wants to redo the façade or a developer who has property in Gary but can’t find money to build its infrastructure.
“We’ll look at all the positives and negatives and make a good decision,” she said. •
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