Kitsap Economic Development Alliance has joined with our colleagues in Clallam, Jefferson and Mason counties to take on the acute problem of access to capital for businesses.

In March the newly formed Olympic Finance Development Authority (OFDA) filed its Articles of Incorporation with the Secretary of State’s Office. A charter board of directors and a consultant are completing the business plan and developing proposals for capitalizing a revolving loan fund, as well as managing portfolios and making new loans from other existing funds that are too small to stand on their own.

The long-range goal is to develop and sustain sources of financing and deal-structuring expertise to optimize opportunities for business growth and job creation on the Olympic Peninsula. By combining our efforts, we will ultimately generate sufficient loan volume and income to cover costs of providing the service to businesses in each area. Stand-alone funds in any one of the counties, including the larger Kitsap, would be difficult to sustain financially without long-term subsidy.

Non-profit, alternative lending entities such as this are in place throughout much of Washington and the nation. In this state alone there are small business revolving loan funds which have been operating for more than 25 years in Stevens, Ferry and Pend Oreille counties in Northeast Washington and in Lewis, Thurston and Cowlitz counties. There also are funds in Whatcom County, the Tri-Cities, Spokane, Okanogan, Wahkiakum, King, and others.

Although the OFDA will have the ability to make direct loans once capitalized, it can be particularly effective by participating with banks, credit unions and investors. By providing a small portion of the financing requirement and subordinating its security position, the OFDA can mitigate risk on projects that can’t quite meet a commercial lender’s requirements but are otherwise viable.

Since its inception, the non-profit Lending Network serving Lewis, Cowlitz and south Thurston counties has made more than $8 million in loans that leveraged another $26.6 million in commercial financing and private investment. As of mid-February this year, the 90 businesses that have received finance support have created 390 new jobs and retained 554 jobs.

While small and medium-sized businesses are the backbone of the local economy, large employers also can have needs and challenges getting capital. It occurs with the complex financings to rescue troubled companies (such as through a sale to avert closure), as well as large scale expansions that require amounts far in excess of a single lender’s participation limits. The OFDA envisions developing a combination of in-house expertise and specialized relationships to assist with structuring private and public transactions that require multiple and/or complex arrangements.

Loan applications and counseling will occur through the respective economic development organizations in each county; for Kitsap businesses that will be KEDA.

The speed at which all this is put into place will depend a lot on how long it takes to capitalize internal funds, as well enter into agreements to manage other existing funds. I will keep you informed through this column as financing opportunities emerge through the Olympic Finance Development Authority.