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Understanding where the money comes from - South Dakota Rural Enterprise, Inc. 2007 Winter Report

Business owners and community leaders are often expected to facilitate successful community development by understanding available capital resources. What do our communities need, leaders are asked, to create a business-friendly environment which supports the creation, attraction, retention and expansion of business enterprises? South Dakota Rural Enterprise has developed several strategies that help elected officials and volunteers be effective partners in community development. These tools allow hometown individuals like you to be resources for an entire continuum of financial products. These funding sources can help take projects of all sizes from the planning stage to business reality, benefiting communities throughout South Dakota.

This continuum of capital meets the needs of businesses in varying stages of growth and development. A community serious about its future will consider each of these financial products as part of its total economic development strategy. That doesn’t mean that every town needs to develop each fund. In some cases multiple towns in a region may work together for the purpose of development finance. Among the effective tools South Dakota Rural Enterprise recommends are:

  1. Micro-enterprise loans. Loans from $500 to $35,000 for beginning entrepreneurs to take the next step are considered “micro loans.” These loans should always be coupled with technical assistance from a business mentor, enterprise facilitator, SCORE volunteer, Small Business Development Center or other source of business expertise.
  2. Business development revolving loan funds (RLF). These funds help fill the gap in a business development project between what banks can finance, the equity of the business owner and the total project cost. Regional RLFs may be willing to do the underwriting and servicing of loans for a reasonable fee. South Dakota enjoys several strong regional funds, including REED, NESDEC, West River Foundation and revolving loan funds offered by the planning districts. Communities can benefit by strengthening relationships with those organizations which have the capital, staff and experience to do this vital gap financing.
  3. Participation in the SD Community Capital Fund. This fund, available through South Dakota Rural Enterprise, leverages a local deposit of between $25,000 and $100,000 into an unlimited number of loans up to 10 times that amount. This funding vehicle has advantages for communities of any size, from metropolitan areas to our smallest rural municipalities.
  4. Community Equity or Venture Fund. Participants in funds like the RAIN® Fund (administered by the Enterprise Institute) take an ownership position in a business for a limited amount of time with a reasonable expectation for return on investment. Equity Funds can be used to finance businesses with a high growth potential or simply to retain an essential business in the community.
  5. Community Savings Accounts are administered by the South Dakota Community Foundation to benefit specific communities or regions of South Dakota by creating permanent endowments. The earnings are awarded at the recommendation of a local board of directors.
As economic development volunteers or community leaders, you can be a vital resource for the options available to make things happen in your hometown. For more information about the continuum of capital, contact South Dakota Rural Enterprise at 605-978-2804 or e-mail .
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Ken Stork, President and CEO of Citibank (South Dakota), N.A., left, presents a Citigroup South Dakota Community Development Innovation Fund check to SD Rural Enterprise President Beth Davis with SD Lt. Gov. Dennis Daugaard in attendance.
Ken Stork, President and CEO of Citibank (South Dakota), N.A., left, presents a Citigroup South Dakota Community Development Innovation Fund check to SD Rural Enterprise President Beth Davis with SD Lt. Gov. Dennis Daugaard in attendance.

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