Filling the Lending Gap

Scott Martin wants to fill the lending gap. Martin is the president of the Twin Cities Community Capital Fund (TCCCF), a nonprofit economic development lender based in Minnetonka. Founded in 2005, the fund is “an unregulated, unconventional, gap lender,” Martin says.

Small businesses and nonprofits sometimes need more financing than banks or agencies like the Small Business Administration (SBA) choose to lend. The fund works with small businesses and commercial lenders so small businesses can obtain financing they need from loans from a traditional lender and the fund. Together, the loans fill financing gaps and turn potential projects into beneficial realities.

One such project was guided by Greg Duscher, vice president of People’s Bank of Commerce, a community bank in Edina. A client had used a hefty down payment to purchase a vehicle maintenance facility on a contract-for-deed basis, leaving him cash-strapped and unsure of how he would make a large future balloon payment. “They wanted to refinance a new loan that would cover 90 percent of the facility’s value, but we couldn’t go higher than 75 percent,” Duscher explains. “And because the deal would net them a significant amount of cash, they didn’t qualify for an SBA loan.” So Duscher contacted Twin Cities Community Capital Fund. Bob Palmquist, senior loan officer at the fund, reviewed the deal, and loans from People’s Bank and the fund were soon available. “It was a win-win deal,” Palmquist says. “People’s Bank took on 50 percent of the financing—a comfortable level of risk for them—and it partnered with TCCCF instead of a competitor. The company exchanged a contract-for-deed for long-term, fixed-rate loans, and it got the necessary cash for day-to-day operations.”

The story was much the same for Shapsen Management, an equipment leasing company in Plymouth. Looking to purchase used equipment to lease to a local printing company, Shapsen learned that their bank was only willing to fund 75 percent of the deal on a short-term basis and that the Small Business Administration doesn’t offer loans for used goods. Rick Hansen, co-owner of Shapsen Management, says that another “win-win” situation was born when his banker contacted Twin Cities Community Capital Fund. “We only had to put 10 percent down, and we got longer-term loans,” he explains. “The bank loaned 50 percent of the equipment cost—which meant less risk to them—and TCCCF loaned the other 40 percent.”

Getting Started

In the 1970s, Martin worked as a city manager and community development director for Excelsior, Champlin, and Chanhassen where he came to see how important small businesses and nonprofits were to city and county economies. In 2000, he took a job as president of Minnetonka-based Northland Institute, a nonprofit susidiary of Northland Foundations in Duluth, which promotes economic development in Minnesota and around the country. While overseeing loans to small, employee-owned businesses nationwide, Martin began to conceive of a nonprofit, self-sustaining fund that could loan money independently of restrictions imposed by banks and government programs.