A loan program unveiled last week fills an important void by targeting money to small businesses in rural and downtown areas. The new loans also come at a critical time when credit markets across the country remain frozen.
Coastal Enterprises, Inc. was selected by the U.S. Treasury Department last year to receive more than $100 million in New Markets Tax Credits to help business growth in low-income areas. It was the fifth New Markets allocation CEI has received, bringing its total to more than $480 million.
Using the tax credit program, which Sen. Olympia Snowe helped create, CEI has helped finance 23 projects in the northeastern United States, triggering private capital investment in low-income communities of more than $770 million. The projects cover a wide range of industries, such as fishing, insurance, construction and sustainable development and forest conservation.
In Presque Isle, it helped an insurance company expand and upgrade its technology infrastructure, which helped it to add 45 employees and provided funding for the city’s first national chain hotel, with about 40 jobs expected to be created.
CEI also used the funding to bring Katahdin Paper to Millinocket and East Millinocket as part of an arrangement with The Nature Conservancy to keep the towns’ paper mills open while also protecting forest land nearby and in Washington County. This was the largest project done through the New Markets program.
CEI last week announced first-in-the-nation plans to extend the program to small business. Through a partnership with Bangor Savings Bank, CEI crafted a pilot program to offer New Market loans of between $500,000 and $2 million. It will begin with $9.5 million worth of loans, with the potential to offer $30 million more.
The money can be used to renovate buildings and buy equipment for projects like a rural health clinic, a daycare center or job retraining center at a community college, all of which could spur job creation, not only at the facility financed by the program, but by drawing other businesses to the area, says John Moore, Bangor Savings Bank’s senior vice president for community development.
“This is designed to create jobs where people need them,” he said.
To be eligible, businesses must be located in Maine’s rural counties — Oxford, Franklin, Somerset, Piscataquis, Aroostook and Washington — or in designated downtown areas, including Bangor, Orono, Old Town, Unity, Rockland and Dexter.
Businesses borrowing New Markets funds pay a low interest rate and have a longer time to pay back the money, thereby lowering their monthly payments. This may allow them to expand more or hire more workers than they expected, Mr. Moore notes.
As Sen. Snowe said last week: “This innovative approach could not come at a better time as our small businesses are falling victim to tightening credit due to the weakening economy.”