Common Capital recharges loan fund for Hampshire County
Jim Kahle, owner of Jim's Auto Trim on State Street in Springfield, worked with Common Capital to finance his business.
Common Capital CEO Christopher L. Sikes during an interview at Berkshire Bank.
HOLYOKE — Common Capital helped James S. Kahle start Jim’s Auto Trim on State Street in Springfield back in 2009.
Without Common Capital, he wouldn’t have five employees plus himself working in the business. He wouldn’t be able to give discounts to customers who help out Open Pantry. He wouldn’t have collected more than 15,000 pounds of food for the needy.
Now, Common Capital, formerly the Western Massachusetts Enterprise Fund, is asking for the general public to help it help entrepreneurs like Kahle through its new Community First Fund.
Here is how it works, according to Christopher Sikes, Common Capital’s CEO: Local residents loan Common Capital and the Community First Fund at least $1,000 for three years at 2 percent interest a year paid every six months. The money is backed up by Common Capital’s more than $7 million in assets and 62 active loans made in Hampden, Franklin, Hampshire and Berkshire counties.
Sikes’ team will then pool that money and loan it to local entrepreneurs like Kahle.
Common Capital has no loans outstanding and has aided more than 400 businesses in its 23-year-history.
In the past, Common Capital raised all its money from the state and federal government, lines of credit from banks and investments from socially responsible pension funds run by religious organizations. Those will continue to be the source of most money to be loaned.
“What we are really trying to do through this Community First Fund, it’s not the money, quite frankly,” Sikes said.
As of last week, Common Capital has raised $111,500 toward a $500,000 goal, said Michael Abbate, the chief operating officer.
Getting loans from individuals is more expensive and time consuming than relying on traditional sources. Just getting the prospectus drawn up cost $25,000 in legal fees.
But relying on bureaucracies doesn’t fire the imagination and get people feeling a part of the effort in the same way the Community First Fund does, Sikes said.
“We want to get people invested physically in the community,” Sikes said. “Then to get them to think about problems in the community and how they can bring other forces to bear on those problems.” Sikes figures that there is $70 billion originating in just Hampden, Hampshire and Franklin counties invested on Wall Street in the stock and bond markets. That’s money earned here that leaves the region and is invested elsewhere.
“Yet we are starved for capital,” Sikes said. “All you have to do is drive around Holyoke or Springfield to see that. We just take it for granted because it has been the case for so long.” Sikes plans to send out a newsletter so investors know where their money is going.
Investor Joshua B. Knox said he looks forward to seeing his savings work for the community as well as for him and his wife, Brita Dempsey. They are in for $2,500.
“All you ever hear is ‘buy local,’” Knox said. “Well this is invest local. It’s a great way to put your money to work here in the local community and earn a return on it. We’ll also be able to see the return here in the community.”
It’s hard to invest in a local business without a go-between like Common Capital, he said. The due diligence alone would overwhelm him. Also, that’s quite a risk because one business could fail.
Also, 2 percent is not a bad rate of return, he said.
Three-year certificates of deposit in this market range from 0.25 percent annual interest rate to just under 2 percent, according to bankrate.com But the Community First Fund spreads Knox’ $2,500 out over a number of businesses, minimizing his risk.
Common Capital often steps in where bankers fear to tread in an era of tightly regulated loans.
Kahle turned to Common Capital in 2009 when his bank, United Bank in West Springfield, couldn’t swing his small business loan without a partner.
“I couldn’t qualify for a bank loan because of a credit score,” Kahle said.
He was 63 and had lost a job; it was either start a business or retire. “I’m not about to do that,” he said.
He’s also gotten loans from Common Capital to help him get through tough winters. He does custom motorcycle seats, car head liners, truck covers and car interiors.
“We need weather and money to make our business thrive, he said.
Banks had basically stopped making business loans back in 2010 when William M. Clifford, owner of 4 Brothers Gourmet Deli on Route 202 in South Hadley, was getting his business off the ground. He opened in 2012 with a loan from Common Capital.
“It was especially tough for food businesses,” Clifford said. “No one was interested in my idea.” Common Capital also provides counseling to business owners, something banks can’t do because of lender liability laws.
Sikes said Common Capital is well known for retail and food start-ups. It also helped finance Hot Table in Tower Square in downtown Springfield when that restaurant was new.
But a new focus will be on existing manufacturing businesses like machine tool shops, which need loans to expand and take on bigger projects.
“Our research has shown that that is where the potential for job growth lies,” Sikes said. “There are many companies just poised to grow.”