CDFIs and Small Business Lending

About the Author

CED Program Interns & Students

IMG_5221aPrevious blog posts have discussed the role of Community Development Financial Institutions (CDFIs) in North Carolina. CDFIs are typically smaller financial institutions that engage in mission-drive lending intended to expand access to capital in low-wealth and underserved communities in order to foster economic development and revitalization.

This post, one in a series of posts profiling CDFIs with links to North Carolina, will highlight Mountain BizWorks, a CDFI focused on supporting small businesses by providing short-term loans, credits, training and consulting to micro enterprises and small businesses. Mountain BizWorks works primarily in Western North Carolina with businesses who may find it difficult to secure funding from banks and other traditional sources. What makes Mountain BizWorks unique is that all its loan decisions and relationships are managed locally, and they work to ensure clients’ success by offering highly customized, peer-to-peer business coaching by an extensive network of local business owners. 

Background & Mission

Mountain BizWorks started as Mountain BizCapital (MBC). MBC was established in 1989 and became a certified CDFI in 2003. It has evolved into a small business CDFI that works to help smaller businesses grow and larger businesses thrive. Its mission is to generate jobs and ensure economic resiliency in Western North Carolina by helping small businesses start, thrive, and grow by providing loans and peer-to-peer business coaching.

Lending and Investing

For 25 years, Mountain BizWorks has been making business loans ranging from $1,000 to $150,000 to emerging and established small businesses in Western North Carolina. They have a particular focus on working with businesses unable to access financing from banks and other traditional sources, as well as low-income, minority, women, and immigrant entrepreneurs, and businesses that operate within the local food system.

Small business loans are provided to help local businesses for start-up, operating and expansion costs. Mountain BizWorks raises both loan investments and operating capital from a variety of sources including banks, foundations, businesses, religious institutions, government entities and individuals. Mountain BizWorks has a unique model for raising capital for its loan funds. Investors can invest as little as $1,000 and choose terms as short as one year or as long as 10 years. Investors receive a fixed-rate annual simple interest return of 0 percent to 3 percent. According to board member Randy Siegel, more than 40 individuals have provided more than $400,000 in investment in the loan fund to date.

Loan Profiles 

Asheville’s Jonathan Scales’ jazz band, Jonathan Scales Fourchestra, has received two loans from Mountain BizWorks in the last year. He attempted to go to a bank for a traditional loan, but was denied. “It’s like a human relationship, you get to sit face-to-face (and explain your situation),” Scales said of his experience of Mountain BizWorks. “It’s not just a computer algorithm.” Scales’ loan also benefited people outside the band, he noted. In the creation of the album and supporting concert tour, he hired visual artists, photographers, other musicians, T-shirt makers and mixing engineers. The latest album, “Mixtape Symphony,” was released last week, and it reached No. 6 on the iTunes jazz charts.

Other Examples:

  • $100,000 in operating capital as a line of credit for Solar Energy Design & Installation in Buncombe County
  • $30,000 business purchase as a term loan for a Tienda (Spanish store) and a Butcher Shop in Buncombe County
  • $10,000 in operating capital as a line of credit to a Textile Designer in Polk County

Impact & Performance

  • $10 million in total loans to small businesses in Western North Carolina
  • 754 loans issued since inception
  • $2 million in new loans since 2014
  • Over 3,500 jobs created between 1989 and 2013
  • Loan loss rate consistently under 2%
  • Received Financial Assistance Awards from the CDFI Fund at the U.S. Department of Treasury in 2004, 2005, 2008, 2011, and 2012.
  • Received a $1 million Award in 2014 from the federal Small Business Administration for small business loans

Current and Future Work

Mountain BizWorks’ recent focus has been shifting toward micro loans and entrepreneurs. In fall 2013, it shifted its focus from business education programs to lending. Additionally, their popular business basic courses, Foundations, were streamlined and moved under the management of a new private business arm to cut the nonprofit’s costs. In 2014, inquiries were up 50 percent over 2013, loan approvals were up 15 percent, and coaching engagements doubled. In July 2014, they hired a new Executive Director, Patrick Fitzsimmons, former Executive Director of the American Red Cross of Western North Carolina.

This past spring, the federal Small Business Administration approved $1 million in loan capital for Mountain BizWorks, which in turn will be used for microloans for small businesses. “With $1 million for microloans to entrepreneurs and entrepreneurs-in-waiting, this funding will help foster new small businesses and, most importantly, more jobs in Western North Carolina,” then-Senator Kay Hagan said in a news release.

Additionally, in April 2014, Buncombe County Commissioners voted to give Mountain BizWorks $50,000 toward a new microloan program to help small local businesses get needed capital. Mountain BizWorks will leverage the county funds to receive an additional $300,000 from the federal Small Business Association Microloan Program.

“People often ask what’s the county doing for small businesses,” County Commissioner Brownie Newman said. “I think that’s a really good question. So we’re trying to put some ideas forward for what the county can really do to support and foster the small business sector in the community, which is really where the majority of jobs will be created in the future…We concluded that piloting this program with Mountain BizWorks was a great way to go. We don’t need to reinvent the wheel.”

This post is the final post in a series of profiles of CDFIs working in North Carolina. Check out additional profiles here and here.

Ben Lesher is a graduate student in the Master of City and Regional Planning program and the Kenan-Flagler Business School at UNC-Chapel Hill. He is also a Fellow with the Development Finance Initiative.

Leave a Reply

We will read all comments submitted to us, but we will publish only those comments that serve to advance our readers’ understanding of a post and are consistent with our institutional commitment to non-advocacy.

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>