Purpose

The Northeast South Dakota Community Action Program (NESDCAP) established the Northeast South Dakota Economic Corporation (NESDEC) as a sister organization to stimulate economic opportunities through loans, technical assistance and partnerships.

Description

The Northeast South Dakota Community Action Program (NESDCAP) created the Northeast South Dakota Economic Corporation (NESDEC) in 1978 to stimulate economic opportunities through loans, technical support and partnerships – NESDEC brochure.  An overview of NESDEC was presented at the 2008 Community Investment Futures conference.

NESDEC provides economic opportunities to the residents of its service area, through small business loans, technical assistance, and partnerships with financial institutions and other business assistance organizations.  Over 90 area banks participate with NESDEC's loan programs.

NESDEC administers the loan programs listed below, providing opportunities for low- to moderate-income individuals to secure loans.  NESDEC’s Business Loan Package includes a Business Loan Application, Business Financial Statement, Business Plan, and Cash Flow Projections.

• Certificate of Deposit Pledge Program – This is an innovative financing method in which NESDEC guarantees up to 50% of a loan from a private lender typically not to exceed $20,000, in the form of a purchase of a Certificate of Deposit from a local lending institution. The CD Pledge program makes it more feasible for the lending institution to make the loan by collateralizing part of its repayment. Applications must demonstrate a positive cash flow and provide a comprehensive business plan.
• Direct Lending – Typically NESDEC provides direct loans for up to 50 percent of total project costs. Loans should be secured by collateral. All property serving as collateral may need to be appraised by a qualified appraiser. Applicants must demonstrate a positive cash flow and develop a comprehensive business plan. The direct loan program can be divided into:
  • Direct Loans: Direct loans up to a maximum of $150,000 provided at a below market interest rate. Loans over $25,000 typically involve a bank partner.
  • Equity Fund: NESDEC has established a RAIN equity fund which may invest in businesses.
  • Intermediary Re-Lending Program: This is a direct loan program in which NESDEC will loan up to $250,000 or 75% of the total project cost at below market interest rates. The source of capital for this program is USDA Rural Development.

NESDCAP is also involved with housing development activities, which grew out of the agency’s weatherization and home repair programs.  It has worked closely with USDA Rural Development to process Section 504 loans or grants, and through NESDEC it has successfully accessed the Section 502 Direct Leveraging Loan Program, which can be used for mortgages with terms of generally 33 years (but as high as 38 years) and interest rates as low as 1%.  NESDCAP is a CHDO (Community Housing Development Organization).

NESDCAP further promotes community and economic development by providing training and technical assistance support to other organizations.  As described in the agency’s December 2008 newsletter, NESDCAP received a Rural Community Development Initiative (RCDI) three-year grant in the amount of $261,475 from USDA Rural Development to provide technical and financial assistance to the following five organizations: Glacial Lakes Area Development; Grow Spink; Town of Leola; Town of Summit; and Campbell County Economic Development.  This financial assistance will allow the organizations to provide new and expanded services to their communities by building their capacity in housing, community facilities, community and economic development activities, and programming.

Outcomes

NESDEC receives 200-300 inquiries each year.

Through March 2009, NESDEC has:

• Made 1,414 loans to 914 area businesses
• Directly financed more than $37.1 million in loan activity
• NESDEC has made 80 housing loans, directly financing more than $1,431,796 in housing loan activity
• A collection rate of 98%
• Assisted in creating or maintaining 7,324 area jobs
• Historical averages
  • Of creating 5.18 jobs per loan
  • Leverage ratio of 5.29:1
  • Participation of $26,304 per loan
• NESDEC has participated in financing 52 small-scale, light manufacturing firms, but the major demand is in the service, retail, and wholesale sectors
• NESDEC has created a job for every $5,078 in revolving loan fund expenditure
• Currently, NESDEC has 348 active loans, totaling $12,292,220
  (274 direct, participation or IRP loans, 43 CD pledge loans, 26 housing loans, and 5 rebuilding credit loans)

The Calvert Foundation highlighted a number of NESDEC success stories as part of its profile of NESDEC in 1995.