Page 146 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

Building Communities through Entrepreneurship Development 135

Two, CDFIs often couple technical or business assistance with lending, ei-
ther in partnership with other support providers or through their own staff.
For entrepreneurs in this stage of business development, having access to
training and technical resources to help operate the business is often as crit-
ical, if not more so, than access to the capital itself.
In Appalachian southeastern Kentucky, the Kentucky Highlands Invest-
ment Corporation (KHIC) has operated for more than 30 years. This CDFI
has a long track record of making capital and business assistance available
to entrepreneurs in a very rural and distressed part of the country. In a case
study of the organization, Markley and Barkley (2003) conclude that the
“focus of Kentucky Highlands’ activities is on the entrepreneur and his or
her enterprise, not the capital used to support the entrepreneurs. KHIC
works with individual entrepreneurs to put together a package of assistance
that will increase the probability of the new business’ success” (13–14).
The KHIC has succeeded in tapping many sources of funds to capitalize
its programs, including SBA and IRP. These funds, in turn, have given this
CDFI the flexibility to customize assistance to entrepreneurs to best meet
their needs. In some cases, the need may be met with a working capital
loan. In others, the loan might come with an agreement to have a member
of KHIC’s staff work side by side with the entrepreneur to overcome a busi-
ness challenge and effectively use the capital provided. KHIC, like other
CDFIs, has the flexibility and mission to provide support to rural entrepre-
neurs that more traditional, regulated financial institutions cannot.
As with the availability of capital to support business start-up, access to
operating capital also depends to some extent on the availability of alter-
native financial institutions (e.g., CDFIs) or programs (e.g., CAP) to provide
capital when bank lending is not feasible. While these programs are in-
creasingly available in or already serve rural communities, access to nontra-
ditional sources of capital in more isolated rural places is still difficult. Any
entrepreneurial support system must address the availability and cost of
capital for entrepreneurs once they have started business operations and re-
quire a source of working capital.

Financing Enterprise Growth
Entrepreneurs who are actively growing an enterprise often seek outside
sources of both debt and equity capital. While banking institutions are a
primary source of debt capital for growing businesses, the most critical cap-
ital gap for rural entrepreneurs relates to access to equity or venture capital.
There is often an information gap for rural entrepreneurs in understanding
equity capital markets. Most rural entrepreneurs are familiar with the re-
quirements of debt capital. Accepting a loan creates an obligation to repay
the capital on a specific schedule and at a predetermined cost.