The former Montana Idaho CDC has come a long way since it started as a women’s entrepreneurial development nonprofit in Missoula, Montana in 1986. Conceived with a $50,000 grant from Ms. Magazine, the lender described as a community development corporation has slowly grown to manage about $500 million in assets.
On May 7, the Montana Idaho CDC changed its name to Mountain Finance, or MoFi, to reflect its emergence as a general finance company. It offers business loans, education and counseling to borrowers who are outside the financial mainstream.
There’s clearly a need for a nontraditional lender. MoFi moved into Idaho in 2012 and is now adding Wyoming, Oregon and Washington to its service area. It has seen 25 percent compounded annual growth every year for the last eight years, said its president, Dave Glaser. It now employs 32 people in offices in Missoula, Bozeman and Boise. The company’s Idaho share has expanded fast; in the last two years, more than 50 percent of the nonprofit’s lending, by dollar amount, was in Idaho. Its average loan size for small business lending in Idaho is $150,000.
MoFi has come a long way from its Ms. Magazine roots and no longer focuses on women or minorities, but Glaser said women, minorities, rural dwellers, and low-income individuals and communities are often clients because they are the entrepreneurs who are most likely to have trouble finding traditional bank loans.
“Lots of different people apply; it just shakes out that the low-income places and people are left out of the financial mainstream more often,” Glaser said.
Recent borrowers in Boise are the sisters Susan and Sandy Loyd, who started their restaurant Tin Roof Tacos in January 2016 with the assistance of a small loan from the then-Montana Idaho CDC. Tin Roof doubled its projected sales in its first year and again in its second year, and the two are now opening a second location in Meridian.
“That’s why we exist,” Glaser said. “They were so close to bankable. If we hadn’t been there, they might have taken out credit card debt and potentially destroyed their financial future.”
MoFi isn’t a bank. It doesn’t take deposits, and isn’t subject to banking regulations. It’s rated by AERIS, a Philadelphia company that rates community development financial institutions across the country. As a nonprofit financing company, it seeks to achieve both social and financial return with the money it lends. It raises its capital from foundations and individuals, including many in Boise. It also borrows from the federal government.
Nearly 90 percent of the loans MoFi makes come from a bank referral. When a business has found its footing financially, Glaser said, the business owner will often go on to get a bank loan. Some prospective borrowers are rejected many times by banks before finding their way to MoFi.
“The way we underwrite a business or underwrite people is by looking at two things: Their willingness to repay a loan, and their ability. Willingness is much more than a credit score,” he said. MoFi also steps in with education to make sure the borrower has the business information needed to succeed.
The result is a 1 percent loss rate, which Glaser said is slightly higher than that of a bank.
“If we didn’t provide that consulting and education, our loss rate would be 10 to 12 percent,” he said.
The idea of nontraditional lenders is slowly taking hold in Idaho. Idaho Housing & Finance, which works cooperatively with MoFi, has a collateral support program that can help small business owners obtain debt financing under certain circumstances.
The state’s relatively new IGEM grant program could be loosely grouped in with nontraditional funders.
“Some of my clients have been able to access IGEM funding for product development and test marketing, which are considered “speculative” and therefore not SBA-eligible,” said Karen Appelgren vice president and director of Zions Bank’s Business Resource Center.
The private equity firm Banyan Ventures, which opened in Idaho last year, offers early-stage businesses growth capital and direct operational advice. There’s also a lender called Alaska Growth Capital operating in Idaho. And on the smaller end of the spectrum are the Idaho microlenders Economic Opportunity by Jannus and the Idaho Hispanic Chamber of Commerce.
The heart of MoFi’s mission is service to rural areas of the West. Glaser, who grew up in Colorado, was fortunate to experience an eclectic few years of employment after graduating with a degree in environmental conservation from the University of Colorado. He worked as a volunteer for 18 months on a kibbutz in Israel, where he was made the leader of his fellow banana-pickers; he taught kayaking in Boulder; and then he did a stint as an outdoor program instructor in Costa Rica. He also learned some valuable life lessons over a few seasons helping out on sailing yachts in the Caribbean and the Mediterranean before heading to Montana to get a master’s in environmental studies.
In 2007, he was hired at Montana CDC, which then served four counties and managed about $4.5 million in assets.
Glaser has long felt the pull of two key forces: business and the rural West. He’s proud of the nonprofit’s growth and hopeful that MoFi’s work will help preserve and strengthen western communities. Glaser feels as though MoFi is pushing the boundaries of traditional lending in a safe way, and the result will be a better life for all.
“One of our board members said it nicely,” said Glaser: “‘Access to capital is a fundamental human right. If you can’t have access to capital, you can’t get ahead.’”
Anne Wallace Allen is editor of the Idaho Business Review.