Central Oregon businesses are crawling out of the recession.
But for many, a key cog in their growth plans is still absent: access to bank loans.
A new community lending institution wants to infuse local businesses with the money they need to add workers and finance expansions, reaching out to clients who can't get standard bank financing.
Craft3, a nonprofit community development financial institution, opened a Bend office in May, and started ramping up lending activity this summer.
As a nonprofit, Craft3 is regulated differently than traditional banks. Community development financial institutions tap into a pool of funds set aside by the U.S. Department of the Treasury, called the CDFI Fund.
Nonprofit lenders apply for a share of those funds, and invest them into economically distressed communities through loans. Craft3 also receives funds from local banks and private donors, who can potentially realize some tax incentives from the donations because of the group\'s nonprofit status.
The Bend branch is serving businesses in Deschutes, Crook and Jefferson counties, which have each grappled with double-digit unemployment rates for nearly five years.
“Central Oregon has been on our radar for a long time," said Turner Waskom, senior business lender at Craft3\'s Bend office.
“A lot of companies have had to spend their own money coming out of the recession to finance their operations, and they need capital. We can step in and take the place of a bank for a year or two."
Waskom has an extensive background in Central Oregon banking. He worked as a commercial lender for Bank of the Cascades, Columbia River Bank and Wells Fargo before joining Craft3 earlier this year.
Rather than competing with banks for customers, Craft3 operates as a stopgap for businesses seeking loans. Interest rates on loans from Craft3 are typically a percentage point or two higher than traditional bank financing. But they can reach out to businesses hard hit by the recession, who may not qualify for a loan anywhere else.
“We will take an unusual amount of risk in deploying our funds," Waskom said. “We don\'t have the same regulatory requirements as banks. We can take some risks that they can\'t."
Risk is key for lending institutions. During the housing boom of the last decade, standards for home loans were so lax that many applicants didn\'t even have to prove a steady stream of income to get a mortgage.
But banks tightened their belts dramatically following the 2008 crash, a trend that seeped out of the mortgage market and ground business lending to a near-halt.
Those standards have eased a bit, according to a July survey of banks by the Federal Reserve Board.
But banks are still cautious about who to lend to, weighed down by bad loans during the boom years and a wave of new regulations that came after the crash.
Craft3\'s goal is to create a pathway for businesses to eventually qualify for standard bank lending. Many of Craft3\'s clients are referred to them by banks or local economic development agencies.
Economic Development for Central Oregon helped recruit Craft3 to the region. Besides helping businesses that struggled through the recession, the company is an ideal partner for startups looking for financing before they\'re fully operating, said Jim Coonan, EDCO\'s venture catalyst manager.
“Having someone like Craft3 that does lending prior to when traditional bank lending is available is a big deal," Coonan said.
Craft3 is starting small in Central Oregon, with just Waskom and one other employee working out of a leased office on Northwest Harriman Street.
But they\'ve already helped about a dozen Central Oregon businesses get financing, including Rotbloc, a Bend business that makes a wood decay repellent out of recycled rubber and plastic; Outlaw Energy, a Sisters-based biomass energy company; and the Pine Theater in Prineville, which used a Craft3 loan to build a second movie screen.
Many of the Craft3 loans are in the $50,000 to $300,000 range, Waskom said, but others have been for $1 million or more. He said the company could add another employee or two in the next year, if demand keeps up.
“There are a lot of businesses out there that are doing what they have to to survive, paying expenses with their own overhead. We\'re here to help them get the capital they need until they can work with a traditional bank again."
Craft3 was founded in 1995 in the Washington coastal city of Ilwaco. It has since opened offices in Astoria, Portland, Seattle and Port Angeles, Wash. The company has invested more than $250 million in the communities it serves.
Central Oregon businesses looking for financing options are encouraged to contact Craft3 at 541-385-6034, or by visiting the Bend office at 917 N.W. Harriman St.