Ohio’s lenders are getting ready to decide if there really is strength in numbers.
If they agree, they could set up an economic development lenders network to share ideas and resources — with the potential to provide more capital to businesses.
The idea was broached by Andrea Levere, vice president of the Corporation for Enterprise Development, at the Ohio Economic Development Financing Conference last fall. The Corporation for Enterprise Development, a private, nonprofit organization in Washington, D.C., has been active in economic development for 20 years providing policy, consulting and research service.
“In my view, Ohio has always been a state that has been truly a leader in economic development,” Levere says regarding the likelihood of the state forming the lenders network. “There’s always been leadership at the municipal level, and there’s always been leadership at the state level.
“Ohio is a state, probably more than any other state in the country, that has invested in the capacity of the economic development professionals, which has resulted in the creation of an extraordinary number of organizations.”
Formation of an Ohio lenders network likely would be led by Mark Barbash, executive director of Columbus Countywide Development Corp., and Karen Mocker, senior adviser, community affairs, with the Federal Reserve Bank of Cleveland’s Cincinnati branch.
For business owners, Barbash says, the lenders network means two things.
“The first one is better use of resources by the people who lend them money in the economic development sector,” Barbash says. “More importantly, it probably means there will be more resources available and resources that are better targeted to the needs of the business.”
“One of the other things we hope to effect as a group is policy changes so we can use the money differently than we have,” Mocker says, explaining that many of the funds are run off of state and federal government loans. Discovering other ways to operate could open up more opportunities for entrepreneurs, she says.
Levere sees several benefits for lenders participating in a network:
- Information sharing. Many economic development lenders, she says, do their work in an isolated way, and the network could provide an avenue to share best practices. For example, they might have joint training sessions.
- Joint products and services. “Does it make sense for every single loan fund to have its own loan processing capacity?” Levere asks. “Might it not make sense for one organization to invest in the capacity and contract out those services?” The option, she points out, would mirror private sector businesses, with consolidation around core competencies.
- Access to capital. This benefit, she says, is just beginning to develop nationwide. “Wouldn’t you prefer if there’s one statewide fund into which all the loan funds could go to access capital, assuming they met certain performance standards? It would reduce transaction costs of doing due diligence,” Levere says, adding that joint capital strategies could serve to bring in private capital.
The state with the most developed lenders network is Washington. Levere says that in the past three years of working with her organization, the lenders network in Washington has developed ongoing training programs for all members and developed policy work to bring in state funds focused on rural economic development. The group now is looking at joint products and services.
The first step in setting up a network here would be to gather lenders and state and federal representatives to talk about how it could be structured. Barbash expected such a meeting late last month or this month.
Barbash says a lenders network would help ensure everyone is meeting good economic development goals and doing good credit underwriting. In addition, it would offer an opportunity to better understand how federal and state laws impact small business financing and to make recommendations to leverage resources to create more financing opportunities.
“I also think the whole financial modernization bill passed by Congress may lead to larger financial institutions less connected to their communities,” Barbash says. “What that means is there is more of a role for economic development lenders, and we want to make sure we’re prepared to do that.”
Mocker says the network could investigate innovative ways to do small business and microlending, putting to use idle capital.
Four microenterprise development lenders currently exist throughout the state — in Columbus, Akron, Athens and Cincinnati — but there is a large gap in Cleveland, Barbash notes.
Levere thinks Ohio would have an “incredible advantage” to having a lenders network.
“Just because Ohio has lots of resources doesn’t mean they can’t use them better or more,” she says.
Anyone interested in the Ohio lenders network can contact Barbash at (614) 645-8066. For more information on the Corporation for Enterprise Development, visit its Web site at www.cfed.org.
Joan Slattery Wall ([email protected])is an associate editor and statehouse correspondent for SBN.
