The Direct Public Offering (DPO) closed in February this year with $354,000 from 88 investors. Originally the offering gave EDFC two years (two grant cycles) to apply for funds to help buy down EDFC’s traditional lending rate (9.5%) to 5% and set aside a very large loan-loss reserve. EDFC’s board of directors felt that momentum would be lost if the project were to wait that long, and decided to loan the project $150,000 at the lower, social benefit rate of 5% until additional grant funds were accessed. This allowed set aside of $150,000 of investor money as loan-loss reserves for this start-up project.
Matt Gilbert of Mendocino Wool & Fiber (MWF) decided to hold off closing the funds until July in order to follow through on his shearing obligations. In addition to investor funds set aside for loan-loss, the project was enrolled in the State of California Capital Access Program (CalCAP). The CalCAP Collateral Support Program deposited $175,000 in an account that can be drawn upon if the project should fail and would be used to repay investors. This unique tool is available to EDFC because of our certification as a Community Development Financial Institution
Along the way one of the investors who is an accomplished manufacturing business owner took Matt under his wing to see if there were ways to expedite the processing of wool. One thought was to rent a building as opposed to constructing a new one. A search of available properties did not yield a facility which would meet the climate-control requirements of wool processing. MWF moved forward with the plans to renovate the Gilbert’s property on Orchard Ave. The project has hit a few snags with the City of Ukiah Planning Department, but they are being resolved. These issues should not delay the project and MWF is still hoping to open by the end of the year.
EDFC’s innovative approach of leveraging community capital was submitted to Challenge.gov as way to increase CDFI investments in Underserved Rural Communities. Winners of the challenge will be announced on September 30, 2016.
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