Magazine article Partners in Community and Economic Development

Tennessee: Capital for Rural Tennessee's Small Businesses

Magazine article Partners in Community and Economic Development

Tennessee: Capital for Rural Tennessee's Small Businesses

Article excerpt

Access to capital is one of the greatest challenges facing small business owners in the state of Tennessee, especially those in rural communities.

Southeast Community Capital (SCC) is addressing this need by creating the Tennessee Rural Opportunity Fund (the Fund), which will provide below-market-rate loans to small, disadvantaged and start-up businesses in rural communities throughout the state.

This $10 million perpetual revolving loan fund--structured as a public-private partnership between SCC, Governor Bredesen's administration, several state departments and member banks of the Tennessee Bankers Association (TBA)--is the first of its kind.

The Fund will be capitalized through investments by TBA member banks. The state will facilitate the Fund by offering incentives to encourage banks to participate, including:

* A 10-year, 10 percent annual franchise and excise tax credit based on the amount each bank invests. At the end of 10 years, the bank will have received a total tax credit equal to 100 percent of its initial investment. The bank will grant this amount to the SCC to provide a perpetual revolving loan fund. Because SCC has nonprofit status, the bank will receive a federal tax deduction for its contribution.

* In addition, a $1.5 million forgivable loan to the Fund will serve as a loan-loss reserve.

The state will also provide a $250,000 operating grant to SCC each year for five years to help establish the Fund.

Still more incentives exist for banks to invest in the fund. …

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