1. 1 Pooling, Aggregation and Integration: Strategies for Small Issuers to Increase Their Volume Presented by: Nancy Straw West Central Initiative May 22, 2006 New York

2. 2 Organizational Context West Central Initiative  Regional community foundation and a community and economic development organization  Serve nine counties, 8500 square miles, 210,000 people  83 communities, largest is 33,000  Long-term goal: flexible, permanent resources for our region

3. 3 Problem Statement and Catalyst for Innovation  In 1986, regional agricultural economy in a decline, and a shortage of jobs for people who stopped farming  The challenge: find ways to diversify the local economy and create jobs  The problem: lack of flexible loan funds for small business development and as a foundation, WCI was prohibited from making grants to for-profit businesses

4. 4 Solution  Analysis: WCI needed funds and connections  Strategy: Partner with local leaders, commercial lenders and utility companies to: benefit from their knowledge increase deal flow get to know the region  WCI contribution to partnership: strengthen loan portfolios build communities help partners meet the needs of more customers  Innovation: Component funds that make loans (Component fund: a separate pool of funds used in a specific geographic area with input from local advisors)

5. 5 Description of the Program/Model/Strategy  Component Funds are WCI’s assets  Advisory group recommends applications to WCI for final approval or denial  WCI provides underwriting, servicing, reports, etc.  Loans consistent with WCI lending policy  Fees are competitive with similar services

6. 6 Benefits of the Program/Model/Strategy  Appeal to local leaders: donation, tax deduction donor can restrict use make recommendations as to use WCI does underwriting, etc. AND WCI takes the heat if an application is denied  Benefits for WCI: filling a market gap better service to area increased loan volume local knowledge business has local support WCI had infrastructure built goodwill new, flexible funds leverage new funds WCI more adaptable Leverage local dollars with other WCI loan funds partners now donors increased WCI’s asset

7. 7 Implementation Lessons Track Record  33 out of 63 Component Funds can make loans  Component Fund assets available for loans: $5.2 million  Currently, Component Funds represent $907,000 of our $6.4 million in outstanding loans (14%)  Number of Component Fund loans to date: partners in 140 of 725 total loans for WCI (19%)  Total cumulative Component Funds loans to date: $6.3 million of $25.3 total for WCI (25%)  Now 10,000 manufacturing jobs; was only 4,000

8. 8 Implementation Lessons  Critical success factors: local advisors for Component Fund commercial lenders and utility companies as partners  Limitations: work with finite number of advisory groups limited secondary market options for us local people do not want to say no to a project some loan funds are underutilized

9. 9 Looking Ahead…  Future potential: new ways to partner with Advisory Groups working toward State of Minnesota program equity investments, RAIN Funds more services for families with low incomes and for New Americans adapting to changing market conditions  Threats: harder to find new sources of funds  Limitations: turnover in membership of Advisory Committees loans activity slows when market interest rates are low may be too late to obtain CDFI status

10. 10 Looking Ahead… Conclusions:  Yes, this approach could be adapted by developing partnering relationships between a community foundation and a community or economic development organization  Build on what you have, develop partnerships