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1110 IWORMATION
<br /> ® PERIODICALP O
<br /> S STAGE
<br /> I
<br /> YEARS OF
<br /> BUINESS NEWS
<br /> MmERr......p....... ils1
<br /> * *3-DIGIT 553
<br /> / 03 Q 02 94 4
<br /> 1STNATLBANKSELK RIVER1AAD
<br /> RICHARD GONGOLL
<br /> 729 MAIN ST
<br /> SATURDAY,MARCH 14, 1998 ELK RI VERMN 5 53 30-154 4 00
<br /> Development GroupHelpeeks
<br /> of Banks
<br /> ANOKA COUNTY, OTHER SUBURBS TRYING TO BOOST BUSINESS
<br /> BY SARAH L. SLADEK However, as ACEDP gained experience, the group Getting F&C MANAGING EDITOR realized these growing businesses needed capital to Getting Started
<br /> survive. ACEDP immediately organized an invest-
<br /> (Editor's note: This is the third part of a three-part ment program to remedy this problem. The Anoka The Federal Reserve Bank of Minneapolis highlights
<br /> series examining the participation of Federal Reserve- Sherburne County Capital Fund (ASCCF) acts as a the following guidelines for banks considering the start-
<br /> regulated banks in community development corpora- bank community develop- up of a community development corporation.
<br /> tions (CDCs). Thursday's edition explained what ment corporation; a tool , reb s g •Assess local needs. Begin with an assessment of the
<br /> CDCs are and why only a handful of local banks are which allows banks and ":';'.'.#0-;.<2-."
<br /> area's economic and community development needs,as
<br /> participating in them. Friday's edition featured First holding companies to make z �;; �. well as the demand for loans and equity investments.
<br /> Bank System's CDC, which has invested millions of equity investments in com- s�4 Talk with the economic development association,small-
<br /> dollars into low-income housing.) , munity development pro-
<br /> " business owners and customers about needs and oppor-
<br /> i jects. y ,- . ` [unities.
<br /> Twelve years ago, Anoka County officials and •Review loans. Consider the loan requests that could
<br /> business leaders realized that if they didn't do Calling on the Banks 4tV s�< a not be approved under traditional.underwriting standards,
<br /> something to sustain business, the older sub- Unlike most bank CDCs, . but which have a community development puipose and
<br /> urbs in the county were going to die.While the outer- ASCCF involves multi- i� potential for success.
<br /> ring suburbs and small towns were prospering, the investors from 10 area " •Develop investment strategies.Consider your finan-
<br /> older ones were suffering, and Anoka County as a ,banks, plus employees of cial position and the resources you would be willing to
<br /> whole needed to boost its economy. ,4 utility companies and the commit to a CDC.Analyze your relative interest in mak-
<br /> As the result of a partnership betwenovernment county. Also, the develop- Roger Jensen ing equity investments versus offering debt financing
<br /> and business, including representatives of area corpo- ment of ASCCP was initiat- and the levels of risk and return you expect.Also consid-
<br /> rations, banks, utilities, and service groups, Anoka ed by ACEDP—an economic development organization er the size of investments you would like to make and the
<br /> County's economic development hati started to —rather than a bank.Nevertheless,ACDEP called upon requirements of your co-investors.
<br /> improve. This partnership, known as'the Anoka area banks to invest in a community need,and the CDC is. •Discuss benefits.Direct benefits may include returns
<br /> County Economic Development Partnership answering that need. from investments,new loans and deposits,and bank rev-
<br /> (ACEDP), focuses on recruiting and supporting "The need for capital is one of the greatest needs our enues from real estate or business projects.Indirect bene-
<br /> emerging technologies companies. .target group has," said Jensen, who serves as the fits may include favorable local publicity, long-term
<br /> "Cities tend to spend a lot of time focusia on bring- ASCCF manager. "The companies we're looking at gains from increased growth in the community and favor-
<br /> ing business in, but all too often those bu.`inesses end have a prototype.They're ready for the next stage,but able Community Reinvestment Act evaluations.
<br /> up moving from point A to point B and dont stay in the they're too small for venture capital,"he explained. • Discuss problems. Potential problems may include
<br /> area," explained Roger Jensen, executivedirector of Jensen recalled that one of the first concerns learning curve risks of equity investment decisions,corn-
<br /> ACEDP since 1985. "We wanted to focus tin bringing ACEDP had before organizing ASCCF was finding munications of CDC management with other participants,
<br /> t
<br /> emerging technology-based businesses to .ur county investors who would be willing to participate. risks associated with equity investments versus conven-
<br /> because these would provide new jobs fp: the people tional loans,and the time
<br /> involved in formin a CDC.
<br /> living here and they tend to pay the best w:,es." CDCs to Page 2g
<br /> •Organize.The CDC can be organized in a number of
<br /> ways: for-profit, not-for-profit, i_
<br /> ,>' s ..AW.,,, _ regional, state,tmulti multi-state, local, bank-only tuCDC or
<br /> {,�� K . , ya 4,%, a.y• 4y,�`' _ ... multi-investor CDC.
<br /> ."'-'11.40;:14,4,'?.*em. 1' • Consider partners. Talk with other bankers, utility
<br /> .AF K �i > • wK 4y 'r \ , companies,local corporations,government officials and
<br /> t '� a " ° ". x - y • • other potential investors about getting involved.
<br /> 4,�. " °" • `";3 • Review regulations. Discuss plans with the federal
<br /> � A r, . ;�> gr banking regulator to be certain the activities will meet
<br /> .....4„w.„*,,k,4„4.4,,,,. `r"'• • �C . fel s" 0`'i''''-',°4"T' y regulatory guidelines.
<br /> fr,
<br /> a�4 •Activate plan.Contact legal counsel to prepare arti-
<br /> , .._ des of incorporation and bylaws. Issue shares of stock,
<br /> f ' t':::‘4,,- _ ,..- .7- elect board of directors, decide on organizational and
<br /> a l - H I t7f `, investment procedures and develop a marketing plan.
<br /> • fir d,.-; '. _
<br /> .: """s t ra"? `" ` �,,,, .�"� �' ...z; mea.x 1�.!TV 'u :..z„:
<br /> �; ,- �t�� ���_-- __� s NewHomeSales
<br /> .,- . .,..d.1 x�. x^+' ... a:.$ 'ti � s", eer:"..
<br /> H✓ ti .fqN�,; �`�:}>si..� ..4,,':,;:', ...:s.. /y
<br /> C1CS from Page 1 :
<br /> "This is a rewarding type of investing technology companies. Now, more 1997,the CDC expects to have raised$1
<br /> because you're investing in start-up often than not, the companies call upon million.
<br /> companies," .'ensen said."However, ASCCF. "We've got a nice portfolio now,
<br /> you're also investing in high-risk com- "There's a real demand for these made up of 20 investments. We expect
<br /> panies. We weren't sure who would be early-stage companies who are growing to make money —a lot of money," he
<br /> willing to make these type of invest- and still too small for venture capital. said, noting that any cash returns or
<br /> ments." They're hungry and anxious to find profits will be invested back into the
<br /> He then realized that banks and utility some help," Jensen commented of the community. "The goal here is to keep
<br /> companies would be the best investors. applicants. He added that because building that fund so we will be able to
<br /> "I realized both have money and both ACED? also provides a business incu- do that many more deals,"he said.
<br /> have a reason to see the community' bator program, it's a "great combo" "This is a smart way to do economic
<br /> -grow;,both,would-benefit.from-invest-...small:companies want and need.... , .- development. Not only are we assisting
<br /> ing in'a project like this,"he said. Prior to investing in a company, in the development of a small company,
<br /> Spurred on by Norwest Bank Jensen screens every applicant thor- but we're assuring they have wages to
<br /> Minnesota, Northeast State Bank and oughly. The more promising applicants support their families.We're creating a
<br /> Anoka Electric Cooperative,eight local then meet the investment committee. lot of good paying jobs."
<br /> financial institutions and utility compa- These groups meet with at least one Relationships throughout the commu-
<br /> nies provided the ASCCF's original company a month and sometimes more. nity have also improved, Jensen said.
<br /> funding of$400,000 in 1993.At the end After that, the ACEDP board of gover- "The bankers are talking to the utility
<br /> of 1996, ASCCF had funding of nors decides on whether to approve or company and the utility company is
<br /> $700,000 and the number of fund mem- deny an investment,'based on the rec- talking to the public sector. A partner-
<br /> bers had increased from the original ommendations of the ASCCF commit- ship like this brings people together in a
<br /> eight investors to 22,adding representa- tee. common goal."
<br /> tives of Minnegasco, NSP, Piper Usually, it doesn't take long to make • Moving toward this common goal has
<br /> Jaffray,Dean Witter and a corps of what a decision,Jensen said."We have a cer- not always been an easy task, either.
<br /> Jensen referred to as "angel" or private taro profile of a company we're looking said Jensen, but the hard work might
<br /> investors. for. We act fairly quickly and our typi- result in a successful start-up.
<br /> By February 1997, the fund had cal investment is between $25,000- "This is not for the faint of heart. It
<br /> invested in 20 companies, 16 of which $50,000." took some people with a little vision,
<br /> are still in business and have created The Benefits Jensen said. "It will take five to seven
<br /> more than 100 jobs. years to see the fruits of our labors.But
<br /> "We made our first investment in ASCCF has not yet generated a cash who knows?Over time,we may see the
<br /> November 1994," Jensen recalled. At return to investors,but expects to do so next Medtronic."
<br /> that time,he was actively searching for in two years or less, and by the end of
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