Thirty people in Whiting, Maine (population: 480) near the border with New Brunswick work for a local seafood canning company that's been around since 1917. The business almost went under before Mike Cote, a former food executive, bought it in 2003. Now, Bar Harbor Foods sells chowder, lobster bisque, canned wild herring fillets, and clam juice online and in national supermarkets such as Whole Foods Market and Stop & Shop. Even better for the local community, the company offers full-time jobs in one of Maine's poorest counties where more than 20 percent of its residents live in poverty.
The success of Bar Harbor Foods is the kind of economic-development story that is all too rare in rural areas. But there's no reason it couldn't serve as a model for others. Cote didn't just breath new life into the company on his own. The achievement wouldn't have been possible without the help of Coastal Enterprises, a Maine community-development corporation and financial institution that lent him roughly $600,000 at a crucial early stage. Cote used the cash to buy new equipment to update the seafood canning factory, the only one still operational in Maine. The investment agreement worked out better for Cote than trying to take out a loan through a bank. "You don't have anybody knocking on your door immediately to get their money back," Cote says.
Investing in local businesses throughout Maine and New England is a hallmark of Coastal Enterprises, known as CEI. CEI is one of hundreds of community-development corporations and financial institutions nationwide that lend money to businesses or entrepreneurs as a way to develop local economies and, in turn, create jobs. "These are alternative financial resources," says Ron Phillips, president of CEI. "We lend money to unconventional entities that don't have a track record or collateral or enough cash flow to land a bank loan."
These types of economic-development groups began in the 1960s as an outgrowth of the civil-rights movement--the driving goal was to give greater opportunity to a wider swath of Americans, particularly in urban areas. Over the years, many of the groups like CEI have evolved into full-scale local financial institutions that can anchor economic development in their communities. The Opportunity Finance Network, a national group representing community financial institutions, estimates that its approximately 200 members have invested and managed $33 billion in community development funds over the years.
CEI and its subsidiaries operate in both the nonprofit and for-profit realm. The nonprofit arm offers funding and counseling for entrepreneurs and businesses, while its for-profit arm manages money, offers venture capital to businesses that seem poised to create jobs, and helps companies take advantage of the federal government's new markets tax credit that supports businesses in low-income communities. Other influential rural community-development financial organizations include the Kentucky Highlands Investment Corp. and Craft 3, a nonprofit lender that serves both rural and urban communities throughout the Pacific Northwest.
CEI has been around since 1977 when Phillips moved his family from New York City to Maine and created the organization as a way to think about rural development and finance. Now, the organization employs 88 people, manages approximately $898 million in capital, and has financed more than 2,250 businesses—everything from a dairy farm to a gelato store to a solar-power company to a former paper mill that turns the byproduct of wood harvesting into power. These businesses are important throughout New England because they can create pockets of jobs and ventures inside smaller communities. "In rural economies, what is often overlooked is that a small business, which employs fewer than 20 people, can make a huge difference in the landscape," Phillips says.
Community-development corporations and financial institutions are not without their challenges. For one, those operating in rural areas don't have as much access to money from foundations and other investors as urban-based nonprofits in larger cities often do. This can make it harder to raise money to invest in rural areas. "Philanthropic institutions tend not to be concentrated in rural areas except for Wal-Mart," says Mark Pinsky, the CEO of the Opportunity Finance Network. This lack of foundation funding for rural economic development, combined with the economic aftermath of the global recession, can make it harder for these groups to raise money, turn a profit on their investments, and sustain themselves.
By far, the biggest challenge is simply measuring the impact of these groups. How can you count the number of jobs a business creates, or the good it does throughout the community if CEI and other similar groups fund such a wide range of entrepreneurs and companies across sectors? CEI alone gives money to businesses that operate in tourism, food, renewable energy, and fisheries. "At the end of the day, financing does not create jobs. Businesses create jobs, and businesses succeed in so many different ways," Pinsky says.
Yet none of these caveats matter much to the businesses helped by CEI's local investing strategy, which values the good of the community as much as turning a profit. Just take the town of Whiting, where Bar Harbor Foods continues to grow annually by about 25 percent, according to Cote. "We are the largest employer in the area in one of the poorest, most rural counties in the state," he says. That's great news for the little Maine town.