ARC Announces Successful First-Round Investment Closing of Appalachian Community Capital
When fully funded, ACC expects to leverage $233 million in private bank
capital and help create 2,200 jobs.
At the Clinton Global Initiative's 2015 CGI America meeting in Denver on June 10, ARC Federal Co-Chair Earl Gohl (at far right) announced the successful first-round investment closing of Appalachian Community Capital (ACC), a new central bank for development lenders. He was joined by Clinton Global Initiative founding chair President Bill Clinton (middle) and (from left) Bank of America Senior Vice President Susan Harper; Calvert Foundation President and CEO Jennifer Pryce; Access to Capital for Entrepreneurs President/CEO and ACC board member Grace Fricks; Ford Foundation Senior Program Investment Officer Christine Looney; and ACC CEO Lori Glass. (Photo by Adam Schultz/Courtesy of Clinton Global Initiative)
DENVER, Colorado, June 10, 2015—Appalachian Regional Commission (ARC) Federal Co-Chair Earl F. Gohl announced today the successful first-round investment closing of Appalachian Community Capital (ACC), a new central bank for development lenders that will increase the availability of capital to small businesses in the 13-state Appalachian Region. ARC made a lead investment of $3.45 million in equity and operating support. Its regional lending partners raised an additional $12 million in debt and equity from Bank of America, Deutsche Bank, Calvert Foundation, and the Ford Foundation. Additional supporters include the Mary Reynolds Babcock Foundation, the Claude Worthington Benedum Foundation, the Annie E. Casey Foundation, and BB&T Bank. The first-round investment capital alone is expected to finance 165 small businesses and create 790 new jobs; about half of that capital, $7 million, is already approved for loans to participating community loan funds. By October 2015, ACC plans to deploy 90 percent of the capital to community lenders for small business loans throughout the Appalachian Region.
Gohl made the announcement June 10 at the Clinton Global Initiative America (CGI America) meeting in Denver, Colorado. Participating in the announcement were President Bill Clinton and representatives of investors and participating regional loan funds. ARC's commitment to making capital available through ACC is vital to economic development efforts in Appalachia and a model for regional economic development in distressed markets (see ARC's 2013 CGI announcement press release).
"Appalachian Community Capital is a collaboration of like-minded partners that slices through barriers to create new sources of capital for the great investment opportunities of Appalachia," said Gohl. "ACC, driven by the Region's mission lending community, is focused on securing Wall Street dollars to invest in Main Street enterprises to help drive the Region's economic diversification."
Finding capital is difficult for growing businesses in Appalachia, as systemic factors have limited the number of sources; according to recent studies, Appalachian small businesses receive only 82 percent of the loans of their counterparts nationally, while businesses in Appalachia's economically distressed counties receive less than 60 percent of the loans of their national counterparts.
"Bank of America is pleased to invest in Appalachian Community Capital. Enhancing access to capital is critical to supporting the economic redevelopment of rural communities, especially those impacted by declining coal production," said Dan Letendre, managing director of Community Development Financial Institutions for Bank of America.
Appalachian Community Capital's innovative business model calls for raising grant capital and leveraged debt from funding sources not available to, or underused by, individual funds, such as regional and national banks, utilities, and national foundations. Because this new central bank will pool the capital needs of its members, it can attract investors that are seeking to place larger amounts of money; it is expected to leverage $233 million—$42 million over the next 24 months alone—in private bank capital, and help create 2,200 jobs.
"I am very happy with the creation and capitalization of Appalachian Community Capital, which will invest in high-performing community loan funds located in Appalachia," said ACC board chair Ray Moncrief, of Kentucky Highlands Investment Corporation in London, Kentucky. "There is a drought of access to capital for Appalachian businesses in coal country, and this a significant step toward providing the much-needed capital to those businesses that are expanding, diversifying, and employing Appalachian workers."
Grace Fricks, president and CEO of Access to Capital for Entrepreneurs in Cleveland, Georgia, and an ACC board member, added, "On behalf of ACC, we are excited about the opportunities this will create for the small businesses and manufacturers that are the backbone of job creation in rural Appalachia. Many high-potential small-business borrowers—including woman-owned and minority-owned businesses—are already in the pipeline just waiting for this kind of support to grow and sustain their businesses and put our people to work. Businesses will be able to see the effects of this funding very quickly, in the next few months—this is great news for rural Appalachia."
ARC and its partners committed to establishing Appalachian Community Capital to significantly increase business lending in the Region by pooling capital needs, attracting investors at a larger scale, and providing a simplified vehicle for impact investors that reduces transaction costs. ARC's commitment and the support of its partners will better enable local entrepreneurs to start small businesses, create high-quality jobs, retain local wealth, and ultimately improve the quality of life for people in the Appalachian Region, which faces challenges from a longtime resource-dominated economy.
"Our entrepreneurs need access to capital, and Appalachia has historically been underserved. ACC will link our promising fledgling businesses with the critical funds to help them grow and succeed," said Kentucky Governor and 2015 ARC States' Co-Chair Steve Beshear. "Rural markets need innovative solutions like ACC, and I anticipate that the availability of these funds to our local businesses will spur new development and growth throughout eastern Kentucky."
"Deutsche Bank is proud to join with Appalachian Community Capital in supporting the flow of capital for small businesses in the Appalachian Region. By partnering with the dozen high-performing community lenders of ACC—all with deep roots in their vibrant communities—we believe Deutsche Bank, along with our investor group, can play a meaningful role in growing local businesses and creating much-needed jobs," said Gary Hattem, managing director of Deutsche Bank Global Social Finance Group.
ARC has significant experience in supporting development finance institutions in the Appalachian Region, including the development and expansion of local loan funds. Currently, several new angel investment funds are being developed in the Region, and the Commission continues to work closely with Federal Reserve Banks and the U.S. Department of Treasury to serve Appalachian communities.
"Raising capital can be time- and resource-intensive for development lenders," said Calvert Foundation President and CEO Jennifer Pryce. "Through Appalachian Community Capital, local loan funds in the Region will be able to access capital efficiently, meaning they can spend less time fundraising and more time working with small businesses."
"It's fantastic to see this public/private collaboration bear fruit in Appalachia," said Xavier de Souza Briggs, Ford Foundation's vice president of Economic Opportunity and Assets. "This is a great example of bridging divides to make markets more inclusive and expand opportunity in every region of our country."
ACC CEO Lori Glass will continue to lead the bank's efforts to increase access to capital for small businesses in the Region. Glass has extensive expertise in development finance with a background in private banking, national Community Development Financial Institutions (CDFIs), and the U.S. Department of Treasury CDFI Fund.
VIDEO: ACC Announcement, June 10, 2015 (The announcement was made during the CGI America meeting's plenary session "New Horizons: Unlocking the Potential of Rural America." President Bill Clinton's remarks about ACC begin at about 2:10 in the video.)
The Appalachian Regional Commission (ARC) is a regional economic development agency that represents a partnership of federal, state, and local government. Established by an act of Congress in 1965, ARC is composed of the governors of the 13 Appalachian states and a federal co-chair, who is appointed by the president. Local participation is provided through multi-county local development districts.
Each year ARC provides funding for several hundred projects in the Appalachian Region, in areas such as business development, education and job training, telecommunications, infrastructure, community development, housing, and transportation. These projects create thousands of new jobs; improve local water and sewer systems; increase school readiness; expand access to health care; assist local communities with strategic planning; and provide technical and managerial assistance to emerging businesses.
About Clinton Global Initiative America
The Clinton Global Initiative (CGI), an initiative of the Clinton Foundation, convenes global leaders to create and implement solutions to the world's most pressing challenges. Established in June 2011 by President Bill Clinton, Clinton Global Initiative America (CGI America) addresses economic recovery in the United States. CGI America brings together leaders in business, government, and civil society to generate and implement commitments to create jobs, stimulate economic growth, foster innovation, and support workforce development in the United States. Since its first meeting, CGI America participants have made more than 400 commitments, which have improved the lives of nearly 1.4 million people.
CGI also convenes an Annual Meeting, which brings together global leaders to take action and create positive social change; CGI University (CGI U), which brings together undergraduate and graduate students to address pressing challenges in their community or around the world; and, this year, CGI will also convene CGI Middle East & Africa, which will bring together leaders across sectors to take action on pressing social, economic, and environmental challenges. For more information, visit clintonglobalinitiative.org