From startup funding to supporting nonprofits, local knowledge is key
When the time comes to set up a startup or a nonprofit, the first thing the founder needs to do is secure funding. While donors and investors can play an important role in this, founders often need a bank loan – and this can be a challenge, especially when starting a small local business.
Large banks often struggle to offer flexible credit options, and this is where community banks can fill the void in more than one way. Community bankers, along with other local decision-makers, have one crucial factor in the success of a local business: first-hand knowledge of the community, its socio-cultural climate and its current needs.
A loan alone is not enough to start a successful business or nonprofit organization. John Hill, SVP and Director of Community & Business Banking at 1st Security Bank, sees his role as a “link” within the community, connecting clients to opportunities such as alternative non-bank lenders and microfinance options when needed. For example, Hill says there are nonprofits out there that specialize in helping startups or small businesses set up, so he matches clients with the nonprofits that are the best fit.
The connections don’t stop there. Hill also refers startups and nonprofits to other local businesses who can provide assistance in several areas necessary to get started successfully. For example, these companies often need to work with the local U.S. Small Business Administration, and it is also best to work with local insurance companies, local accountants (CPAs), and local legal advisors who are experienced in setting up businesses. By leveraging these local resources, founders have the advantage of working with a team that has a clear understanding of the community and its needs. You can get to work right away instead of trying to keep your team updated on what’s going on in the community.
“As a community banker, you can offer all of these connections to help this startup or small business make sure they are starting the business the right way,” says Hill.
As part of the community, someone like Hill knows resources that others don’t. “One example in Seattle is Ventures,” he says. “They have a business setup loan program of up to $ 35,000 to support startups and small businesses.” He also cites the Rainier Valley Community Development Fund as an agency that supports businesses in their local community. “They are not banks, so their lending is not the same risk as we look at it,” explains Hill. He adds that there are also local grants and government-sponsored options like the Linked Deposit Loan Program through the Office of Minority & Women’s Business Enterprises. “There are a lot of options,” he says, and locals like Hill who helped found the startup or a nonprofit have extensive knowledge of these resources because they live and work in the area where the company is founded .
Common goals for the community
Marc Cote is Executive Director of Parkview Services, a non-profit organization that provides affordable housing for people with intellectual and developmental disabilities. Cote, who works with 1st Security Bank, says it’s critical to work with people who understand and support what the nonprofit is trying to achieve. And with the massive changes in the Seattle area housing market over the past decade, it’s critical to have locals who have seen this firsthand.
“We live in these communities and we invest in these communities,” Hill says. “We live our core values and try to reconcile these core values with the companies and non-profit organizations we work with.”
For example, Hill works as a volunteer on a local committee that supports inclusive housing solutions and offers advice on home ownership. This correspondence in core values, along with Hill’s knowledge of inclusive living and the connections he has made through his volunteer work, is an asset when providing advice and assistance to Parkview Services.
Effective problem solving skills are critical to running a successful business. Cote says Parkview got into a rough patch a decade ago and didn’t develop many homes between 2009 and 2012. One of his goals was to create more living space for the population that the non-profit organization supplies due to the large (and rapidly increasing) demand.
“The board suggested we wait for public funding to develop, but it was a very slow process,” explains Cote. “So I finally got permission from the board of directors to take out loans to buy.” Under this new model, Parkview can purchase land and then apply for public funding after some preliminary development. “By buying the property in advance, I can now accommodate the population immediately, although I will have to go through rehab if I get the public funding,” explains Cote.
The first house Parkview bought after this new model was in 2018 and was created through community connections. “A church has reached us. They were already home to people with developmental disabilities, but they weren’t interested in keeping this house, ”says Cote. “But they wanted to sell it to an organization that works to provide shelter for people with disabilities, so they sold it to me for $ 250,000 below market value.”
The assistance of a local lender helped Cote and his team identify the challenges, sift through possible solutions, and find the one that best suited the local conditions.
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