Loan fund helps smallest of businesses grow

Its name is a mouthful: the Eastern Connecticut Segmented Loan Fund. But its purpose is simple: to help small- and micro-sized business succeed through flexible loans and accompanying business training.

Since 2004, the fund has helped nearly 40 small businesses create or retain almost 200 jobs in eastern Connecticut with some $4.7 million of capital.

Donna Wertenbach, the president and chief executive officer of the Meriden-based Community Economic Development Fund, says her organization was surprised by the growth, and success rate, of the loan fund, which began with an original capital pool of about $3.8 million. Today, the loan fund has closed a total of 46 loans, helping 38 businesses.

Of those 38 businesses, the majority - some 25 - are either owned by women or minorities. The loans were made across 18 communities in eastern Connecticut, including its cities and its suburbs. Loans typically range from $50,000 to $250,000, and they can be used by start-up businesses or those already in business that need some extra financing - everything from expanding inventory to buying equipment or renovating its commercial operations.

The community-development fund says it provides loans that are often more flexible than standard bank loans, and the organization often provides financing to small businesses that can't find the appropriate bank financing.

The loan fund's range is quite diverse. It's helped dairy farmers, photographers, landscapers, bakers, some small manufacturers - even convenience stores and food services.

"We don't just do loans," explains Wertenbach. "That's why it works. We're dealing with higher risk businesses, so we offer free business consulting, and (loan participants) take business training courses."

The Community Economic Development Fund was first created in 1994 during the Lowell Weicker administration. The purpose of the community-development fund was to create an alternative funding structure for inner-city and disadvantaged businesses. "He (Weicker) understood the importance of small business to the Connecticut economy, to provide a nonprofit arena whose mission was to support and stimulate small business development in a conducive environment - and we've been doing it ever since," says Wertenbach.

The eastern Connecticut loan fund's capital backing comes from a handful of local community banks, including Dime Bank, Liberty Bank, Eastern Federal Bank, the Savings Institute Bank & Trust, Chelsea Groton Bank and the Jewett City Savings Bank. In addition, the Mohegan Tribe is an active participant, along with the Connecticut Housing Finance Authority. "All of those parties are investors," says Wertenbach. "They invest capital into the loan pool fund. Then all of those funds are used to provide loans to small businesses located in the eastern part of the state."

The role of the Community Economic Development Fund is important, as well. It covers the overhead expenses of running and managing the loan fund. In addition, it provides a "holistic" array of services to small business. Each year, the community-development fund offers its business training programs to several hundred small-business men and women. Only about a third of those who take the various community-development fund classes are also receiving loans through the organization. The others are there to learn about the basics of small-business entrepreneurship, from understanding a balance sheet and financing, to tax information, marketing and advertising.

The Meriden-based community development fund offers numerous classes in eastern Connecticut, as well, for its loan participants as well as other interested small businesses. Wertenbach says those classes are essential to the success of a small business, and it ensures that the firm will be able to pay back the borrowed funds from the Eastern Connecticut Segmented Loan Fund. Since Wertenbach's organization often makes loans to small- and micro-sized businesses that banks won't lend directly to, the organization needs to ensure that the fund will remain solvent with low loan delinquencies.

"We're here to help start, grow and stabilize small locally owned businesses to become a part of the fabric of Connecticut's economy," says Wertenbach.

a.cronin@theday.com