Common Capital Invests in the Future of Western Mass.
Christian and Andrea Stanley are a rare breed.
Specifically, as the entrepreneurs behind Valley Malt in Hadley since 2010, they are among maybe a half-dozen enterprises in the U.S. dedicated to malting barley on a small scale. Longtime home brewers who dreamed of opening a brewery featuring local hops and grain, they were surprised to find there was no local supplier for the ingredients they needed, so they decided to fill a market niche.
The Stanleys purchase local grain and also grow their own at the Northampton Community Farm. They learned the art of malting — a weeklong process that unlocks starch-splitting enzymes and primes the grain for brewing — from online videos and old pamphlets from the U.S. Department of Agriculture.
And for a needed financial boost — an equipment loan that enabled them to quadruple production and meet a growing demand from craft breweries throughout the Northeast — they can thank Common Capital.
Formerly the Western Mass. Enterprise Fund before changing its name and refocusing its mission last year (more on that later), Common Capital is a nonprofit organization that provides financing and business consultation to small businesses and community projects, with an eye on growing the region’s economy by boosting job creation and quality of life across the region.
Common Capital has benefited entrepreneurs in a variety of specialized fields, including, as it turns out, the niche into which Valley Malt snugly fits.
“We were looking at what areas we would go into, and we made a decision to go into agriculture,” said Christopher Sikes, CEO of Common Capital. “But we’re also doing a growth study to identify growth businesses. We’re working with a whole consortium — the Economic Development Council, the Pioneer Valley Planning Commission, small-business development centers, among others — to identify those sectors that would be really good for us.”
And now, when it comes to loans, Common Capital isn’t acting … well, alone.
“We undertook a strategic planning process,” Sikes said. “We wanted to create more of a community loan fund. Our tagline really catches that: ‘local investment, shared future.’ We see ourselves as more than just a loan fund; we see ourselves as a community resource for business assistance. It’s more than just loans.”
Sikes was speaking of Common Capital’s newest endeavor, the Community First Fund, which is aimed at achieving a number of goals, from forging stronger connections with the public to broadening the size and scope of the organization’s lending activities.
It will accomplish this by allowing individuals to make loans through Common Capital that will earn interest for them while the money immediately goes to work to benefit a local startup or nonprofit.
“We really recognize that there is an incredible need for — and demand for — local investment from people who can invest dollars locally into the community and get a return,” Sikes said. “We’ve been asked for years to if we would like to do something like that. So what we have done is to launch the Community First Fund.”
Michael Abbate says the Community First Fund is a win-win for both investors and the businesses and nonprofits they support through Common Capital.
“It’s a unique offering,” added Michael Abbate, COO of Common Capital, noting that participants must be residents of Massachusetts and willing to invest between $2,500 and $50,000. “They can invest in their local communities through the work of Common Capital. They make a loan to Common Capital, which goes into the general lending pool, with a three-year term, and they get a 2% annual return.”
For this issue’s focus on financial services, BusinessWest explores how Common Capital is seeking greater common ground in its communities — and finding new ways to benefit the common good.
Abbate noted that Common Capital has identified seven ‘drivers’ it uses to screen projects that come before it for possible funding. These are projects that do one of the following: create and retain jobs, provide opportunity for low-income people, provide essential community services, rejuvenate neighborhoods, develop sustainable environmental practices, support businesses with local ownership, or recirculate local dollars.
All these can be boiled down to one overarching goal: will a project seeking funding have a positive impact on the community?
As an example, Sikes and Abbate cited the Spring Meadow Apartments Assoc. of Responsible Tenants (SMART), an organization comprised of the residents of a HUD housing project in Springfield. The complex includes 270 households and a computer lab that hadn’t been used since 2003.
SMART wanted to refurbish the lab, and Common Capital provided the financing. The new lab will boast 10 computer workstations, high-speed Internet, and new paint and flooring. More important, residents of the apartments will be able to obtain e-mail access and training in graphic design and other skills, and possibly homework assistance and résumé consultation as well — all of which may improve their job prospects.
Furthermore, the space upgrades are being provided by a worker-owned construction firm, United for Hire, a project of the Alliance to Develop Power in Springfield. Jobs, education, economic development — it’s an impressive mix of benefits springing from the renovation of one computer lab.
“We want to be well-known in the community for what we do,” Abbate said regarding how Common Capital is trying to raise its profile through its choice of funding targets. “Ideally, we want to finance businesses and community projects that have a high impact.”
As an example of its focus on environmental sustainability, Common Capital partnered with Maine-based Coastal Enterprises Capital Management to assist with early-project development of 2-megawatt solar facility on Greenfield’s capped landfill. Part of that effort was attracting $10.8 million in new-market tax credits, a program launched by the federal government a decade ago that provides tax advantages to entities that invest in low-income communities.
At full capacity, the solar facility will supply nearly half the electricity for the town’s municipal buildings and save Greenfield about $175,000 per year in electricity costs; it also created 50 temporary construction jobs and four permanent positions. The park’s developer, Axio Green, has also donated $100,000 to Greenfield Community College for worker training in the solar-energy sector, with 45% profits from electricity sales past predetermined benchmarks also to be donated to the college — again, making this a project that meets several of Common Capital’s goals at once.
Sikes said much of the work of Common Capital, as a community-development financial institution (CDFI), has not changed. “We still do microloans and small-business lending; that has actually increased. But we have more programs we’ve been able to take advantage of to get capital out to businesses. One way we really try to bring capital into the region is through new-market tax credits; those credits leverage much larger amounts of capital into the region.”
Added Abbate, “we do still lend up to $300,000 to small businesses and community projects with high impact. We can now offer SBA [Small Business Administration] loan guarantees through their Community Advantage program. And we received a $2 million equity grant from the U.S. Treasury’s CDFI fund that enabled us to broadly expand the types and size of projects we can get involved with.”
He also cited special sources of financing that focus on healthy foods, such as its partnership with PVGrows, a collaborative network dedicated to enhancing the sustainability and vitality of the Pioneer Valley’s food supply. Common Capital is the lead organization operating the PVGrows Loan Fund, a lending pool to finance agricultural infrastructure on farm and food-system businesses in the region.
Meanwhile, Common Capital continues to co-fund a growth study to identify those industry sectors and specific businesses that are growing, need capital, and will have high community impact, especially through increased employment.
Connect the Dots
All of which makes the Community First Fund — which is a way to strengthen the connections Common Capital has long sought to forge — even more exciting, Sikes said.
Through it, “we found we could bring in different types of capital,” he noted, adding that the initial goal is $500,000 in private investment in the fund. “We found people were approaching us to do different things, and we recognized that we could have a far greater impact if we saw ourselves as part of a larger community effort.”
Abbate said it’s a natural extension of the region’s long-established consciousness for buying locally. “We wanted to close the loop by allowing people to also invest locally” he said. “We knew the demand for folks looking for alternative investments, especially after what happened on Wall Street in 2008 and 2009.”
Added Sikes, “there are literally billions of dollars invested outside the community from within the community. If we could get even one-tenth of 1% of that to stay in this region, it would have an incredible effect. That’s why the fund is so important, and it’s the first step.”
To Sikes, it’s all about people craving greater control over how their region grows. He pointed to the fiscal-cliff haggling in Washington (still unresolved at press time as the Dec. 31 deadline approached) as an example of how lawmakers use money as a political football but don’t see the actual needs of their communities back home.
“This is a dramatic way to say it, but the president and speaker of the House are making decisions on things that will affect this community, hundreds of miles away. They don’t have Western Mass. at the top of their minds, yet what they do affects us. If the cliff happens, people will see a $2,000, $3,000, $4,000 tax increase, not to mention some of these vital services will be slashed.”
In that environment, he said, Common Capital, and its new emphasis on bringing individuals into the investment process, is enabling real change and growth that local people can recognize.
“We have a long way to go,” he told BusinessWest, “but I feel like we’re on the right track.”
Joseph Bednar can be reached at bednar@BusinessWest.com