By BETH BILY
ave a business in need of gap financing for a planned expansion or equipment acquisition? You might try asking your local electric utility provider for the needed funding. Although their primary purpose is providing power to residents and businesses, electric cooperatives also are playing a significant role in funding local economic development projects.
Grand Rapids-based Lake County Power, which has a service area that stretches across parts of eight counties in northeast Minnesota and approximately 43,000 members, helped with funding a number of recent projects. Lake Country Power Public Relations Coordinator Tami Zaun noted; “Electric cooperatives do have connections to federal funding to spur growth in their local service areas.”
Loans through the electric service cooperative can be accessed through two streams – federal funds through the U.S. Department of Agriculture and through LCP’s own revolving loan program.
USDA loans can include up to $1 million in financing at zero percent interest with up to a 10-year payback. Awarded through the Rural Economic Development Loan and Grant Program (REDLG), the loans are issued on a point system. Economically depressed areas score highest, with consideration also given to factors such as job creation and retention, increased quality of life and the project’s potential economic development impact.
Nonprofit loan awards can finance 80 percent of the project costs, while private, for-profit loans are available for up to 30 percent of the total cost. Debt refinancing, private speculative development, housing development and equity investment projects are not eligible for funding through USDA programs.
Jeff Sheldon, manager of energy services and economic development, notes that the LCP revolving loan fund now has about $500,000 available and has to date loaned more than $1.5 million. Applicants can be eligible for up to $100,000 in loans through the program. The gap financing provided by LCP is a win-win for both business and lender.
“Banks love it when we can provide gap financing. It helps lower their risk,” said Sheldon.
Some recent projects that were assisted by Lake Country Power’s revolving loan fund program include Grand Rapids MNSTAR Technologies, which received $100,000 to “expand its wire harness manufacturing business with additional equipment, inventory and working capital;” Serenity Living Solutions, which received a $230,000 rural development loan to bring an assisted living facility to the Remer area; Natural Harvest Food Co-op in Virginia, which received a $100,000 revolving fund loan for its 9,000-square-foot expansion, and Handberg’s Marina, which received a $100,000 revolving fund loan to build a repair and retail marine store in Crane Lake.
“Honestly, we couldn’t have done it without Lake Country Power’s help,” Lori Sanborn said in a news release. Sanborn and her husband Jeff co-own Handberg’s Marina. “Lake Country Power was such a fun piece of our expansion project. The funding helped bridge the gap between what the bank provided and what we were able to provide.”
Sheldon noted that the electric service provider has been involved in projects in its service area for many years. Dating back to the early 1990s, Lake Country Power has directly and indirectly provided more than $5.8 million in economic development funding. While Sheldon has personally been involved with numerous economic development projects, he noted that decision-making on loan eligibility moves through a loan review committee prior to final consideration by the Lake Country Power Board.