Small Town Tennessee

Sponsored by the Tennessee Department of Economic & Community Development

A First of Its Kind

Tennessee's Rural Opportunity Fund has Originated 400 Loans totaling over $30 Million

By Lee Burlett

Credit for small business is tight. In this economy, credit, period, is hard to come by. And if your business has a poor credit score, is inconsistent in earnings or is a start up and on top of that is located in the rural South ... well, forget about getting a business loan, right? Not so fast. In Tennessee, businesses in rural communities throughout the state are eligible for the Tennessee Rural Opportunity Fund. The Fund is a first-of-its-kind public-private partnership between Tennessee Gov. Phil Bredesen's administration, the Tennessee's Bankers Association and its Member Banks, and Southeast Community Capital Corp. The program has created a $12 million revolving loan fund to provide loans to small, women, and minority-owned businesses that are unable to access traditional bank loans in rural Tennessee. To date, over 400 loans totaling over $30 million have been given to small, rural-based businesses in Tennessee.

The program has been so successful that it won the 2009 Multi-Community Program Award for market populations over 100,000. The recognition came from Bismarck, N.D.-based Business Retention and Expansion International. Not only is the Fund available to companies that cannot receive traditional financial assistance, loans made through the program are provided at below market rates.

The Rural Opportunity Fund targets companies located in rural Tennessee that:

• Are in early stage development, ready to cross over to the expansion stage
• Are expansion stage companies needing capital for accelerated growth
• Have inconsistent growth and/or profitability
• Are start-ups with good ideas and strong management that do not have access to traditional financing sources
• Are companies that can generate cash flow quickly
• Have well defined niche markets with defensible market positions
• Have compelling business characteristics and attractive growth prospects

Preferred industries that the Fund is looking to invest in include business services, technology-based companies, government contractors, software designers and specialized or advanced manufacturers.

Industry and business sectors that are typically NOT considered by the fund include retail clothing, restaurants, speculative real estate ventures, start-ups where the principal has no prior industry experience, businesses that primarily sell alcohol and cigarettes, refinancing of existing debt, financing of franchise fees, non-profit organizations and trucking companies.

One of the companies that has benefited from the Fund's rural loan program is Mama Turney's Homemade Pies, based in White's Creek, Tenn. Mama Turney's was founded by Mike and Barbara Turney in 1996 out of Mike's mother's ("Mama" Turney) kitchen baking three pies an hour and selling them from a small barbeque restaurant. Today the business exceeds $1 million in annual sales and has grown from five to 1,500 wholesale distribution accounts nationwide in just 10 years.

Another company that has been approved for loans under the Tennessee Rural Opportunity Fund is Protomet Precision Manufacturing. The East Tennessee company recently received the Business Tennessee Fast 50 award for being one of the 50-fastest growing companies in the state. Protomet, founded in 1997, is now a world-class provider of engineering and manufacturing services for a wide range of industries including medical, automotive, marine and energy.

Several high-profile partners are backing the Tennessee Rural Opportunity Fund including Gov. Bredesen's administration, the Tennessee Department of Revenue, the Tennessee Treasury Department, the Tennessee Department of Financial Institutions, the Tennessee Department of Economic and Community Development, the Tennessee Bankers Association and Southeast Community Capital Corporation.

In addition to the Rural Opportunity Fund, the Tennessee Business Enterprise Resource Office (BERO) provides technical assistance to small and disadvantaged businesses in the state as well as "micro" loans of $5,000 or less to small companies in rural Tennessee that also do not have access to capital.