Summerland Credit Union is putting up half a million dollars in venture capital to build the local economic base and create jobs.
Kelly Marshall, chief executive officer of the Summerland Credit Union, says there has been a lot of talk over the last couple of years about Summerland’s economy, but little about who is going to do something about it.
Since the local credit union needs a strong economy in order to thrive, it has established the new Summerland Venture program to support business and industry.
“As board members, managers and employees we see Summerland Credit Union as an integral piece to the fabric of our community and recognize that our organization’s health is directly proportional to the health of the community.
“Over the past couple of years within Summerland, as in many jurisdictions, there has been significant discussion about economic development and creating an environment that fosters business incubation, business growth, attraction of new business and retention of our existing businesses. The end goal is the creation of local employment to help stem the outflow of residents and attract new ones to keep our schools full, our businesses strong and grow our community base to help support and maintain our infrastructure needs now and into the future,” said Marshall.
“Where the conversation often breaks down is who is going to come forward with the capital to turn that vision into a reality. That’s where we see the credit union having both a role and a responsibility to our community and are excited about this new initiative.”
The funding is being made available for eligible projects in the form of a loan or equity investment.
Principal is subject to repayment with interest, and there will be security terms and conditions Summerland Venture sees fit. Loan and equity terms, fees and rates will be market based.
The $500,000 can be loaned to one enterprise, or it can be spread around to a number of businesses. The plan is to leverage the money by working with potential partners such as Community Futures, the Business Development Bank of Canada and even the Summerland Credit Union itself. Marshall said the plan includes “mezzanine financing” which is a “loan with an interest rate attached with the understanding that at some point you will be qualified for conventional financing.
“We want to help these businesses get to a position where we would never have to take equity. We’re basically a partner in the business until we are bought out as a partner.”
The loans are available only for existing Summerland businesses, Summerland startups and businesses relocating to Summerland. Creation of jobs will be an important criteria.
Marshall said the venture capital plan “is going back to the roots of credit unions, with business on a handshake.” A good person with a good business plan is considered a good bet.
With typical venture capital “you have to have an evaluation of the company which can run from $20,000 to $50,000. “We think the money is better spent on the company,” said Marshall.
Another feature of the local credit union plan is “subordinated debt” in which the credit union will “take a position behind everyone else.”
For example,the fund might be used to help buy a building with conventional financing from a bank. “We take a position behind them. We suborn our position to other creditors.”
He said the plan has been discussed for the last couple of years by the board of directors to help keep the community economically healthy. It took awhile to come up with a business plan that would satisfy regulators.
“We live and die on the borders of Summerland.”
The program starts immediately and applications will be accepted on a continuing basis. There is no end date and the fund could be increased in the future, said Marshall.
These are the strategic priorities to be considered by the Summerland Venture in the review of loan and equity funding proposals:
o contribution towards economic sustainability of Summerland
o job creation preservation or enhancement
o economic diversification
o leverage of other funds
o filling funding gaps
o avoiding overlap and duplication
o economic merit
The following are primary targets for Summerland Venture funding support:
o wholesale and service sectors
o alternative energy
o social enterprise
o small business
o arts and culture
o attainable housing
o film and entertainment
o retail trade
Summerland Venture emphasizes:
o environmentally-friendly manufacturing operations
o arts and culture initiatives that demonstrate solid economic impact
o initiatives that contribute to Summerland economic sustainability
o initiatives that result in sustainable job creation, job preservation or enhancement
o initiatives that contribute to the diversification of the economy
Certain kinds of projects are ineligible, such as these:
o municipal infrastructure
o activities that do not comply with local, provincial or federal legislation
o controversial initiatives with moral, social, religious or public safety concerns
o projects that are 100 per cent construction activities such as real estate development
o projects without a clear proposal, management plan or clear leadership role
Successful applicants must be able to demonstrate direct full-time equivalent job creation, in the form of permanent full-time jobs, permanent part-time jobs, seasonal jobs or temporary jobs such as construction or consulting.
Projects to be funded under Summerland Venture will be assessed for their positive impacts on the community, economic and environmental sustainability and direct increase in taxable property values.