Nathan L.

Historically, Baker County has been on the low end of the totem pole

when it comes to receipt of guaranteed loans and other business

assistance programs available through the Oregon Economic and Community

Development Department.

But change is in the wind.

OECDD records show that during the 1970s through the 1990s, Baker

County and Malheur counties were dead last in business development

guaranteed loans, gap financing and other types of loans lavished on

businesses along the I-5 corridor, the Oregon Coast and other areas of

the state.

While West Side counties were receiving tens of millions of dollars in credit enhancement and business development loans, businesses in Baker and Malheur counties got $508,000. And the gap was even wider for credit access loans and other programs, according to an OECDD report circulated at last Thursday's Pubtalk economic development gathering in Baker City.

However, Rick Minster of the OECDD regional office in John Day, said Baker County businesses are getting some much-needed help from a skilled crew of city and county economic development officials and bank loan officers. The result is that a record volume of OECDD loan funds flowed into Baker County over the past three years.

Over the past 18 months, area lenders and local economic development officials qualified so many Baker County businesses for guaranteed loans and other loan programs targeting businesses in distress, that funding had to be drawn from other counties, where OECDD loans

have been dropping off,

Minster said.

During the PubTalk gathering, Minster provided information on five funds managed by OECDD that give preference to distressed rural communities like Baker City by providing assistance in the form of tax credits or guaranteed loans, gap loans, bond funding, credit enhancement and capital


n The Oregon Business Development Fund is the state's largest revolving loan fund. It targets manufacturing, processing and significant tourism projects, and is designed to leverage private capital by filling a gap in financing and providing an incentive for businesses to expand or locate in Oregon by providing long-term, fixed-rate financing for the purchase of land, buildings, equipment and machinery, as well as working capital.

Under the business development fund, loans may not exceed $700,000. Priority is given to emerging small enterprises with fewer than 100 employees, ventures that create new jobs or retain existing jobs,

according to an OECDD


Targeted funds available at a lower interest rate also are set aside in the development fund for businesses located or considering locating in distressed areas such as Baker County, and on emerging small enterprises with fewer than 100 employees. Priority is given for loans that would

create one job per $20,000 of investment.

More than half of the $57 million in business development fund loans to date have been to businesses in rural areas, and 25 percent of the loans have been for projects in economically distressed areas of the state, according to the OECDD report.

n The Oregon Credit Enhancement Fund is designed to increase the capital available to help small businesses create jobs by providing loan guarantees to banks. Qualifying businesses include manufacturers, processors, natural resource industries, distribution new technology and related businesses.

"Retail businesses qualify only in distressed areas."

The credit enhancement fund guarantee bank loans through conventional insurance for up to 90 percent of a commercial loan up to a maximum of $700,000, and first loss insurance that covers 100 percent up to 25 percent of the loan. For working capital loans the guarantee covers 75 percent of a loan up to $300,000.

Between 1994 and the end of 2006, the department guaranteed 333 credit enhancement loans for a total of nearly $89.5 million statewide. Among areas of the state receiving credit enhancement guaranteed loans, Baker and Malheur counties wound up on the bottom of the pile at $508,000, which was a drop in the bucket compared to the nearly $7.8 million in credit enhancement loan guarantees awarded to the Northeast Oregon region of Umatilla, Union and Wallowa counties.

County groups getting the largest allocation of credit enhancement guaranteed loans included $19.5 million for Central Oregon (Crook, Deschutes and Jefferson counties); $18.6 million for the Portland metro area (Multnomah and Washington counties); $16.7 million in the Mid-Valley (Marion, Polk and Yamhill counties); and nearly $10.9 million in Benton, Lane, Lincoln and Linn counties, according to the OECDD report.

n The Capital Access Program increases the availability of loans to small businesses by providing loan portfolio insurance to lenders who may make business loans that carry higher than conventional risks, while still complying with sound banking regulations.

"This flexible loan program is a private transaction between borrower and lender. A borrower may be any type of for-profit or nonprofit business authorized to conduct business in Oregon.

All parties benefit from Capital Access Program loans. The borrower benefits from access to loan capital that might not otherwise be available; the lender benefits from expanding its small business customer base; and the communities and state benefit from increased employment, increased jobs and economic activity, and increasing tax revenues.

As with other OECDD funds, businesses in Baker and Malheur counties combined were dead last with $68,621 in capital access loans. Businesses in the Northwest region of Clatsop, Columbia and Tillamook counties raked in a combined $51.9 million, followed by the Portland-metro area at $24.7 million; South Valley region (Benton, Lane, Lincoln and Linn counties) with nearly $14.9 million; and the Mid-Valley with $13.5 million, according to the OECDD report.

Harney-Klamath and Lake counties combined for $6.4 million in loans, and the Northeastern Oregon region of Umatilla, Union and Wallowa counties garnered nearly $2.8 million in capital access loans.

n The Entrepreneurial Development Loan Fund program allows the OECDD to make initial loans up to $25,000 to entrepreneurial businesses, with the possibility of an additional follow-up loan up to $15,000. To qualify the applicants must be enrolled or have completed a Small Business Development Center counseling program or other certified training. The applicant must also prepare a business plan and expenditure plan and have them approved by the SBA, according to the OECDD report.

To qualify, businesses must meet two of the following three requirements: the business must have been operating less than three years, the business must have revenues of $175,000 or less for the previous 12 months, or the business must be owned by a severely disabled person.

n The Industrial Development Bonds program issues tax-exempt industrial development bonds for value-added manufacturing and other qualifying facilities in Oregon. For manufacturing projects, an eligible company may borrow up to $10 million through this bond program, but not more than 25 percent of the proceeds may be used to acquire land.

The key feature of tax-exempt industrial development bonds is their tax-exempt status, which lowers the overall cost of capital. Interest payments received by bond holders are exempt from federal and state personal income tax.

From the time the industrial bond program originated in 1976 through June 30, 2007, 197 development bonds have been issued totaling $1.28 billion, creating a projected 17,550 jobs paying an average wage per job of $33,832 ($16.25 per hour), plus benefits averaging $8,619.

Three companies authorized to raise funds through issuing tax-exempt bonds through OECDD defaulted, but the state incurred no liability, according to the OECDD report.

About 35 percent of the total dollar amount was invested in rural areas of the state, according to the OECDD report.

Minster pointed out that figures included in the report on OECDD loan and tax credit distributions were compiled up to 2006 and in some cases the first half of 2007, so they don't reflect recent increases in business development loans and tax credits approved for businesses in Baker City and Baker County.