Microbusinesses Thrown Lifelines Thanks to Backing by Members 1st FCU

MECHANICSBURG, Pa. — It made perfect sense for Members 1st Federal Credit Union to build a funding bridge to help microbusinesses in Cumberland County. One out of four of its members live in the county, and of all businesses in the area, 90% are small businesses.In 2005, the $1.5 billion financial institution was the first to partner with the Cumberland Business First loan program, an initiative intended to stimulate the expansion and assist in the retention of small businesses for the purpose of creating new jobs and retaining existing jobs in Cumberland County, according to Omar Shute, executive director of the Cumberland County Economic Development division, which administers the program. Along with Members 1st, another credit union and three area banks also participate in the program.In January, the credit union donated $20,000 to Cumberland Small Business Fund loan program, another county initiative that helps microbusinesses and is funded by credit unions, banks, government agencies, community development block and county grants among others. Shute said 100% of Members 1st’s contribution will be used to finance loans to owners. The fund, which now has roughly $150,000 in it, is geared toward those seeking less than $20,000 although businesses in rural areas of the county may be allotted more to spur stronger job creation, Shute said. The minimum amount an applicant can borrow is $2,500.“We have a very good relationship [with the county],” said George Nahodil, executive vice president, retail delivery and marketing at Members 1st. “Part of our mission and values is to support our communities, not only through charitable contributions, but also economic development, which brings small businesses into the region.”The CSBF loans can be a lifeline to those looking to add liquidity, hire an additional employee or put a down payment on a building, Shute said. The loans carry up to a five-year term although they could be amortized for up to 10 years depending on the amount borrowed and available collateral, according to the program’s guidelines. The borrower must agree to create a minimum of one full-time equivalent job within three years of loan closing, including a Cumberland County resident who meets the low- to moderate-income guidelines as defined by the Department of Housing and Urban Development. The loans are secured at the highest lien position available on assets such as real estate, machinery and equipment, personal and business vehicles and business assets.“This is a very neat program because most state programs are for the purchase of machinery and equipment. There’s really not any programs targeted towards working capital,” Shute said. “A lot of businesses shut down because they’re undercapitalized. As you know, now more than ever, banks are more conservative.”Members 1st has been offering commercial loans and deposits for about six years, Nahodil said. It’s donation to CSBF is not the first time the credit union has provided funds to assist small businesses. The Capital Area Regional Economic Development Office, a similar undertaking, received a $20,000 donation from Members 1st and the credit union is also working with officials to assist in bringing more jobs to Dalton County, Pa.According to the Pennsylvania Department of Labor and Industry, 90% of all businesses in Cumberland County are small businesses, which is in line with Small Business Administration figures that show they also account for roughly half of all private sector jobs nationwide. Members 1st’s 150,000-member base is spread across six counties with one in four residing in Cumberland County, Nahodil said.“We’re putting our money where our mouth is,” Nahodil said. “With all the bad things going on, it’s nice to know with the new president coming in, that there will be some positive changes in the small business community.”So far, demand for CSBF funds from applicants has been “pretty steady” given the reluctance by some lenders to issue credit or capital to small businesses, Shute said. He predicted that loan requests will pick up fairly soon.“Right now, small enterprises are getting tired of waiting and will want to move forward [with other lenders]. We’re forecasting a spike in the future.”Cumberland County Commissioner Gary Eichelberger commended Members 1st for its efforts and expressed optimism that more private partners will join CSBF over the next few months.“Especially in tough times, it is enormously helpful to have an active partner in our efforts to strengthen our economy. We are elated,” he said. “Contributions from private entities lessen the burden for cash-strapped government bodies in promoting economic development.”–[email protected]