Appalachian Regional Commission Announces Successful First-Round Investment Closing of Appalachian Community Capital
Over $15 million in new investment capital committed to meet the demands of 165 growing businesses, creating 800 jobs in rural Appalachia. When fully funded, ACC expects to leverage $233 million in private bank capital and help create 2,200 jobs.
DENVER, Colorado, June 10, 2015 – Appalachian Regional Commission (ARC) Federal Co-Chair Earl F. Gohl announced today the successful first-round investment closing of Appalachian Community Capital (ACC), a new central bank for development lenders that will increase the availability of capital to small businesses in the 13-state Appalachian Region. ARC made a lead investment of $3.45 million in equity and operating support. Its regional lending partners raised an additional $12 million in debt and equity from Bank of America, Deutsche Bank, Calvert Foundation, and the Ford Foundation. Additional supporters include the Mary Reynolds Babcock Foundation, the Claude Worthington Benedum Foundation, the Annie E. Casey Foundation, and BB&T Bank. The first-round investment capital alone is expected to finance 165 small businesses and create 790 new jobs; about half of that capital, $7 million, is already approved for loans to participating community loan funds. By October 2015, ACC plans to deploy 90 percent of the capital to community lenders for small business loans throughout the Appalachian Region.
Gohl made the announcement June 10 at the Clinton Global Initiative America (CGI America) meeting in Denver, Colorado. Participating in the announcement were President Bill Clinton and representatives of investors and participating regional loan funds. ARC’s commitment to making capital available through ACC is vital to economic development efforts in Appalachia and a model for regional economic development in distressed markets (see ARC’s 2013 CGI announcement press release).
“Appalachian Community Capital is a collaboration of like-minded partners that slices through barriers to create new sources of capital for the great investment opportunities of Appalachia,” said Gohl. “ACC, driven by the Region’s mission lending community, is focused on securing Wall Street dollars to invest in Main Street enterprises to help drive the Region’s economic diversification.”
Local access to capital: Local business owners can access the money through Pathway Lending, which is the community development financial institution that serves Tennessee.
Pathway helps small businesses that are underserved and may not have other access to capital, Pathway Lending President Clint Gwin said. “Pathway Lending is able to access this capital to be able to provide more loans and more resources to Tennessee businesses,” he also said. “We also have business consultants that go in and work with the entrepreneurs to help develop and improve the operations of their company.”
Finding capital is difficult for growing businesses in Appalachia, as systemic factors have limited the number of sources; according to recent studies, Appalachian small businesses receive only 82 percent of the loans of their counterparts nationally, while businesses in Appalachia’s economically distressed counties receive less than 60 percent of the loans of their national counterparts.
Appalachian Community Capital’s innovative business model calls for raising grant capital and leveraged debt from funding sources not available to, or underused by, individual funds, such as regional and national banks, utilities, and national foundations. Because this new central bank will pool the capital needs of its members, it can attract investors that are seeking to place larger amounts of money; it is expected to leverage $233 million—$42 million over the next 24 months alone—in private bank capital, and help create 2,200 jobs.