By Joyce L. Carroll
The Vermont Community Loan Fund (VCLF) just may be the perfect marriage for those who subscribe to socially responsible investing while supporting the buy-local movement.
Investing with the Montpelier-based nonprofit – promoted as a secure option unaffected by the whims of Wall Street – lets Vermonters shape the futures of private-sector businesses, affordable housing, community centers and child care facilities, thus adding a new dimension to the buy-local philosophy.
Likewise, the loans administered by VCLF mean that some Vermont entities that may not qualify for more conventional bank loans can have the capital required to expand, and in some cases, stay afloat.
“Twenty-three years ago when we first started up there weren’t very many organizations like us in the country….all at the time were located along the East Coast,” said Will Belongia, executive director of the Fund. Now a nationwide movement complete with a professional association for members, approximately 1,000 Community Development Financial Institutions dot the country.
Guided by Federal Depository Insurance (FDIC) regulations, banks are limited by the amount of risk they can absorb, Belongia said. “We don’t have that big overarching federal regulator,” he said.
While this may sound like risky business, Belongia said borrowers adhere to the same accountability as they would had they secured funding through more conventional means. Monthly payments, complete with interest rates, and the promise of foreclosure in the event of default, help insure timely repayment.
“We’ve lent out about $65 million and have been able to collect all but $800,000. That’s 1.3 percent of uncollected loans in our 23-year history,” Belongia said, adding borrowers must still have a solid plan in place before applying.
“We do have people who will come in, and they’re just not ready. They have an idea, maybe they are a start-up or have worked at their business part-time and want to go full-time…We send them to the Small Business Development Centers to help them refine their plan,” he said.
Others, he added, are turned away either because they don’t fit the Loan Fund’s mission of supporting enterprises with some degree of social impact, or because the board doesn’t think the potential borrower will be able to pay back the loan.
Investors, meanwhile, realize they are making a values-driven investment. Many have stayed true to the program, Belongia said, and 92 percent of Vermont investors renew their term.
“It’s really a bridge between folks who have some wealth and want to put it in the hands of individuals that need that capital,” he said.
The VCLF isn’t in the market to compete with local banks, he said, and investors know that they may earn less than what they would if investing in the broader marketplace.
At present, Belongia said rates are comparable to what one might find at a conventional bank. Given that all the risk is held by the organization, with most invested in commercial certificates of deposit, investor dollars are safeguarded. Over the course of its history, the Fund has received investment dollars from more than 300 individuals, businesses, foundations and other organizations who have provided anywhere from $1,000 to well over $2 million, with terms from one year to 30 years.
In addition to the loans that account for the vast majority of their business, the VCLF also administers small grants programs. As such, it serves as a pass-through grantor for childcare facilities, administering funds that come from appropriations from the State of Vermont and the sale of Building Bright Futures automobile license plates. Moreover, it has received competitive grant monies from a US Department of Agriculture Rural Development program that it sub-grants to small businesses that need to overcome a marketing, development or engineering problem, Belongia said. It also sub-grants monies in conjunction with Central Vermont Public Service to offset the capital costs of setting up Cow Power enterprises on dairy farms.
The VCLF web site (www.investinvermont.org) shows a list of several hundred recipients ranging from small mom-and-pop businesses like Michael’s Toys in Rutland, to larger housing complexes for seniors and individuals with special needs like the Cathedral Square Corporation based in South Burlington.
For Michael Divoll, a Rutland manufacturer of wooden toys for the past 30 years, a $73,000 loan six years ago meant he was able to relocate and buy the building that currently houses his on-site workshop and store. A tourist attraction for those who visit Rutland, the business even caught the attention of the folks at Disney.
Divoll, who likens himself to a real-life Gepetto, remains grateful. “It allowed me to continue with my business.,” he said.
Also singing VCLF’s praises is Melissa Scheffler, owner of Lissa’s Lil’ Friends Day Care, a home-based child care facility in Bennington. Her loan allowed for some remodeling and the purchase of supplies, ultimately enabling her to increase capacity and grow from a registered childcare facility to a licensed one.
Her four-star program is accredited through the National Association of Family Child Care. “I think there’s such a need for good-quality childcare, and it’s so needed in Bennington,” said Scheffler. “Dealing with the Vermont Community Loan Fund was wonderful.” The VCLF even helped with their budgeting.
In Randolph, the White River Craft Center has been working to change lives through artisitic expression for over a decade. Executive Director Kevin Harty said the program, which first began as a way of reaching area youth with behavioral problems, has grown into a flourishing community center where partnering nonprofit groups and craftspeople work with at-risk groups.
The organization’s $40,000 loan through the Loan Fund enabled the restoration of the circa-1887 Victorian mansion that houses classrooms as well as space for other nonprofit groups. The building is a complementary addition to the Craft Center’s studios, where people of all abilities can try their hand at woodworking, stained glass and pottery.
“We learned that kids were calmer when they were eating cereal out of bowls that they had made,” Harty said.
Belongia has also personally witnessed the benefits his organization offers to disenfranchised youth. Not long ago, a ceremony took place at the site of a former barn that was to be converted into an alternative education facility for Laraway Youth & Family Services in Johnson.
“There were all these people there in suits; bankers and architects. I heard a rumble of yelling in the background. I looked behind me and about 30 teenagers were playing two-hand touch football. These are the kids they’re helping,” said Belongia. “It felt good to see them there, knowing that there’s a place for them to get the support and education they need.”
(from New England Business Journals)