The Montana & Idaho Community Development Corp. is based in Missoula, but it has made Idaho its second home.
The nonprofit lender added “Idaho” to its name in 2015 after making so many Idaho loans that more than half of its lending portfolio was to Gem State businesses. It is one of five “community development financial institutions” in Idaho and about 1,000 nationwide under a 1994 federal law to promote business development with financing for lower-income business people that traditional bank loans miss.
In 2016, it made 32 loans in Idaho worth $5.1 million. Borrowers include El Cafetal, a Columbian restaurant that recently opened at 3116 Garrity Ave. in Nampa, and Garry’s Automotive, the shop at 2200 S. Cole where two longtime employees recently bought out the founder.
Both the restaurant and shop entrepreneurs lacked collateral to secure a traditional bank loan. As they gain equity and assets, the loans will transfer to banks.
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President Dave Glaser recently visited some of his Boise customers, including Tin Roof Tacos at 115 S. Broadway Ave.
Q: Who are your borrowers?
A: We provide capital to small businesses that are nearly bankable. These are businesses that banks wish they could finance. We provide the loan, then we make them bankable and move on to the next business. We also provide large-scale loans for large manufacturing projects or hospitals.
Q: How much business have you done in Idaho since you started lending here?
A: We’ve financed about $105 million, mostly in eastern and northern Idaho, including Golden Valley Naturals in Shelley, Kootenai Medical Center in the Panhandle, and a couple of projects in Rexburg.
Q: What does “nearly bankable” mean, and why don’t these businesses qualify for traditional bank loans?
A: About 40 percent of the businesses we finance are startups. They are run by smart people, but they aren’t bankable because they either don’t have enough assets for collateral, or equity to get a traditional bank loan, but otherwise they look really good.
Sometimes their credit is slightly lower than the threshold for a bank loan, but they usually aren’t that far off on credit score.
We finance them for about 30 months, or the average time it takes for them to become bankable. Then, a bank takes out our loan, and we go to the next business.
Q: What projects have you funded in the Treasure Valley?
A: We’re sitting in Tin Roof Tacos. They were one of our first loans in Idaho and are a shining example of two really smart entrepreneurs that nearly got bank financing. At the last minute, one little nuance in their package didn’t check a certain box, so they couldn’t get a bank loan. Their banker called us and said, “I can’t make this loan. We are getting really close to our close date. Can you take a look?” We made the loan, and now we’re working with that same banker to take us out. It’s been about 18 months.
Several others in Boise are Downtown Hound [a dog day-care, boarding and training business in the Lusk neighborhood] and Richard’s [an upscale restaurant that recently relocated to the new Inn at 500 Capitol].
Q: How is business in Idaho?
A: Last year, 51 percent of our lending was in Idaho. We went from nothing to the majority of our business being in Idaho in four years. We opened an office here. We’ll be hiring more people.
There’s a lot of business activity, and there’s not capital like us here in Idaho. You see a lot of predatory lenders that are dangerous for small businesses. We see a lot of our capital refinancing that predatory debt.
Q: Other than new businesses, what types of borrower situations do you see?
A: If it’s an existing business that had two years of losses, but they bounced back and have had six months of profits, We’re underwriting the projections of that business. Banks can’t do that. We’re more flexible when looking at historical performance, startup, collateral and equity.