‘Local’ remains at heart of their investment
GREENFIELD — Talk about investing in your community! Now they’re actually doing it.
The “they” – Common Capital – got a makeover a year ago, because it had outgrown the “Western Massachusetts Enterprise Fund” name it had since being created in 1987. Now, having moved its operations from Greenfield to Holyoke, the community development financial institution is setting up what it hopes will be a locally rooted half-million-dollar fund — “Community First” — for small, individual investors to help small, local businesses.
As Common Capital, and before that as the Western Massachusetts Enterprise Fund, with its roots as a consortium of community development corporations in the Pioneer Valley, the U.S. Treasury-certified private nonprofit had invested in businesses like Magic Wings Butterfly Museum in Deerfield, the Australis fish farm in Turners Falls and Burrito Rojo Mexican restaurant, also in Turners Falls.
Those kinds of economic development projects can only be enhanced by creating a local pot of money dedicated to meet the unique needs of this region, says Christopher Sikes, Common Capital’s executive director.
“We’re trying to become a place where people who want to invest in businesses in western Mass. can see their money go to work and get a return,” says Sikes, who is a Greenfield resident. “It’s a whole portfolio of businesses, so that significantly reduces the risk, instead of someone seeing one business and saying, ‘I’ll invest in that.’”
Think of it as a three-county mutual fund, except that this is a loan pool, with a minimum $2,500 investment for a three-year term to invest in an array of projects in Franklin, Hampshire and Hampden counties.
Sikes, who moved to the area in the 1980s after his Cambridge piano tuning and repair business needed financing and technical assistance but could find no banks willing to help, got help from Gerry Joseph, the former Franklin County Community Development Corp. head in setting up a Small Business Administration loan fund for a consortium of five CDCs.
The private non-profit organization re-branded itself a year ago as Common Capital, he explains, “to say that we were more than just a loan fund. We were becoming a resource to bring capital into the region. For example, it helped bring in about $300,000 in new market tax credits to help build River Valley Market in Northampton. And when Maine-based Coastal Enterprises was looking for a lender for its proposed solar farm at the Greenfield landfill, it called on Common Capital to make the necessary connections with Berkshire Bank to bring $5.5 million in financing for the 2-megawatt project.
“We don’t have a penny invested, but we put a lot of time in getting the parties together to make an investment,” Sikes says. “Our goal is to make a sustainable local economy, to put our focus there. Any way we can do it, we’ll do it. We’d like to bring in financing for that.”
Common Capital works, along with the Frankllin County CDC, to help coordinate the PV Grows loan fund housed at CISA (Community Involved in Sustaining Agriculture) to help agricultural development in the region to help farmers increase their operating margins. Among the projects it’s working on is a milk processing center using new market tax credits.
Josh Knox, a property superintendent for the nonprofit Trustees of Reservations, is among the first dozen or so investors in the new fund as “a way for me to get a reasonable return on my saved dollar while at the same time avoiding giving my money to folks who are contributing to global climate change.”
His $2,500 investment may be small potatoes in the big scheme of things, but Knox, a Holyoke resident, will see his money become part of the pool for Burrito Rojo and other projects in the three-county area. “I looked at the materials from the Common First Fund and I was blown away. Everything they’re doing is like, ‘Wow — I can invest my money in these things? This is awesome.’”
Sikes says that with $8 million in assets and with its access to federal treasury funds, Common Capital has the flexibility to attract state and private money as well as join with the Franklin County CDC and other institutions to go beyond what banks are able to lend to small businesses.
“Franklin County is the only place in Western Mass., and almost in the whole state, that has a loan fund,” through the CDC, says Sikes, who says the environment is more about combining forces than about competing.
“We’re in a desert for financing, all of these businesses need financing,” says Sikes, adding that Greenfield is also “very unusual that we have two local banks that are highly community oriented.”
And yet, he explains, bank lending doesn’t entirely meet the changing needs of business, with a greater emphasis on fluid “working capital” like inventory, and marketing based on a much keener understanding of niche markets that can be halfway around the world, with a smaller emphasis on fixed assets like plant equipment.
“Because of technology, businesses today have an incredible need for working capital, and banks just can’t provide that,” Sikes says. “I think we’re in a crisis in the country in that we can’t support our small businesses in the way they need to be supported because of the lack of flexible capital, and businesses grow and hit the wall.”
Unlike bigger businesses, which can turn to venture capitalists for the capital they need, smaller operations that need to borrow $500,000 to $750,000 find it’s hard to borrow to grow.
Common Capital typically provides loans for as little as $1,000 and as high as $200,000, Sikes says, although last year it provided $150 to help a family day care operation in Springfield.
With its new Community First fund, Sikes says, “The idea is that if people invest their money, there’s a greater sense of having ownership in the community. And the more we can do that, the more people who can get a return that will grow and grow. The goal is to have many, many more people invested, in whatever ways they can. We’ll have greater flexibility.”
Allowing people to invest in the local economy, Sikes says, is just a way of “completing the circle” in the movement to “buy local.” And if it seems like it’s a growing trend to look closer to home for a broader base of smaller investors, Sikes says once again that it’s less about increased competition for those investors and more about getting people to realize the value of plunking their capital right here in the region.
With $8 billion to $10 billion in deposit accounts in Hampden County alone, and probably twice or three times that much invested in the stock market, he says, “You’re looking at $30 billion available for investment, and none of it’s going locally. There’s so much opportunity here and we’ve just got to get the money out into the region. If you look up and down the valley, look at all the capital needs there are.”
On the Web: www.common-capital.org You can reach Richie Davis at email@example.com or 413-772-0261, ext. 269