An interview with Carla Roberts
Fremont Area Community Foundation is perhaps most well-known for its grantmaking programs and supporting local nonprofit organizations. Supporting economic development, small business growth, and entrepreneurship has also been a longstanding focus for the organization but often looks different from traditional grantmaking due to a variety of restrictions that all community foundations must navigate.
With all sectors feeling the impact of COVID-19, Carla Roberts, president and CEO, offered some insight into the Community Foundation’s pandemic response and its continuing commitment to local businesses.
How does supporting local businesses fit within the mission of the Community Foundation?
We believe small businesses are the backbone of our local economy. We love our business community, buy local whenever we can, and we encourage our grantees to do the same. This support for small business and entrepreneurs goes back to our earliest days. Several people have told us over the years that they got their start because Bessie Slautterback, the organization’s first executive, gave them a $5,000 loan to start a business.
Of course, we live in different times now, with significant IRS restrictions on how a community foundation can engage with local businesses. We can only award grants to organizations with a charitable status, such as 501c3 nonprofit organizations. That is why we work through intermediaries—such as Northern Initiatives and The Right Place—that have a charitable status and mission to support local business. The Right Place is a service organization and vital partner to support manufacturing, agricultural businesses, tourism, and entrepreneurship in Newaygo County. Northern Initiatives is a community development financial institution (CDFI) with the capability to provide financial services to businesses that do not qualify for conventional loans. In 2015, we established a $250,000 loan pool with Northern Initiatives to ensure that local businesses have the working capital to build and sustain their businesses.
The COVID-19 crisis has obviously had a large impact on our entire region, including local businesses. How did the Community Foundation initially respond to the need and what were the considerations for supporting the business community?
When the crisis hit, we were inundated by the needs from all sectors. We had to quickly deploy our staff in new ways, setting most up to work remotely. Within one week we had created the Community Response Fund and a new quick-response grant application and process to deploy grants from the fund. Of necessity, our first priority was to distribute emergency relief funds for food, shelter, and basic needs as demand quickly escalated alongside job losses.
At the same time, we knew small businesses and entrepreneurs were hurting and began to explore possibilities for supporting them in new ways. We encouraged nonprofits and businesses to take advantage of state and federal programs and we set up a technical assistance team of local experts to provide guidance to navigate those resources. The team included Dan Wheat to work with nonprofits, Don Farmer to work with businesses of 50 employees or fewer, and Julie Burrell to work with larger businesses. Those resources are still in place for anyone who needs assistance. More information can be found at bit.ly/FACF-business.
We also began to develop a strategy to help small businesses by leveraging Community Foundation assets to support low-interest loans. It took some time to find a partner—as many local banking partners are inundated with processing federal programs—but we are very close to announcing a program to assist local businesses as we enter our county’s intermediate recovery phase.
Why wasn’t the Community Foundation able to award immediate needs grants or use other parts of its endowment to directly support small businesses?
The primary reason is that it is difficult to establish a “charitable class” which is required by the IRS. But even without those restrictions, we would not have had the available dollars in our grantmaking budget. While the Community Foundation and its affiliates award nearly $9 million in grants each year, our trustees only direct about $5 million of that amount. The other grant funds are designated for specific areas or are otherwise restricted in their use. We estimated that the need in the small business community would likely reach $2-3 million. Since we had already deferred significant resources to immediate basic needs such as food assistance, there were simply not sufficient grant funds to address the emerging needs anticipated during the recovery period for both the nonprofit and for-profit sectors.
Making grants to small businesses from our endowed assets would not only conflict with IRS funding restrictions but would also endanger the long-term power of our endowment. Our trustees have the responsibility to ensure that the endowment remains intact and keeps pace with inflation. To ensure this, we have a spending policy to limit the dollar amounts expended on an annual basis for both grants and operations. Along with stock market fluctuations, tapping into the endowment could impact and reduce our grantmaking abilities for years to come. Our community will need us well beyond the immediate crisis and we need to ensure the Community Foundation is viable for the recovery period and beyond.
Endowment ensures we will be here for the community for good, forever. A great example of the power of endowment is the Harry Williams Fund that was started during the Great Depression. That $5,000 fund has grown to over $9 million in assets and has given out more than $9 million over the life of the fund. Those were troubled times and it would have been easy to spend the funds for immediate needs, but the donor chose to endow them to provide for the present and the future.
What are your next steps for supporting the business community?
We are putting in place some financial programs through intermediaries that will offer low-interest loans on very favorable terms. In essence, we are standing behind the small business community and using the Community Foundation’s assets as a kind of collective bargaining chip to leverage the support we believe local businesses will need—not just for the intermediate recovery period but probably for much longer. We will be announcing details about this program as soon as they are finalized. Stay tuned!
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