Baum's Mercantile is a great example of a small business that's primed for growth.
Baum's is a long-standing, family-owned grocery and general merchandise store in the city of Pittsville in Wood County. Although Baum's operates primarily as a grocery store and deli, owners John and Gale also have been steadily building a successful catering business.
Growing demand for their catering services required more room and equipment to allow for expanded prep space, customer service and new employees. They turned to an alternative source of financing that is helping many small businesses find the capital they need to expand.
Community Assets for People LLC is a U.S. Treasury-certified Community Development Financial Institution, or CDFI, which is a wholly-owned affiliate of CAP Services in Stevens Point. Community Assets for People was able to assist the Baums in creating a business plan for their expansion and assembling a financing package to seek funding from Community Assets and other outside sources. The Baums were able to successfully complete their expansion in September.
All told, community Assets for People has provided 91 business loans, 128 housing loans and 98 auto loans to residents of central and east central Wisconsin since 2006. Similar success stories have been realized all across our state. More than $500 million in loans were made by 21 CDFIs statewide by the end of fiscal 2010.
CDFIs were created by the U.S. Treasury specifically to promote economic and community development in areas that historically faced barriers in accessing conventional loans. They are supported by a diverse group of investors, including foundations, religious institutions, corporations, banks, credit unions and private individuals.
Unlike conventional lenders, CDFIs are concerned with both social and financial returns. They not only lend money to small business owners and nonprofit organizations, they also provide financial counseling and support both before and after the loan to help ensure successful outcomes. The result is more jobs and stronger communities.
I introduced Senate Bill 43 to help build on these achievements by encouraging private and institutional investments in CDFIs. This legislation will create a 10 percent to 12 percent tax credit over two years based on the size of the investment. The incentive of a tax credit will raise awareness about Wisconsin's CDFI industry and encourage investors to invest locally in CDFIs. Through those investments, CDFIs can continue to make loans that stabilize local economies and create jobs. It is anticipated that every dollar the state invests will generate $10 in return.
I was pleased that Senate Bill 43 had a public hearing in the Senate Committee on Economic Development and Local Government shortly after I introduced it, which indicates bipartisan support for the measure. The incentives in Senate Bill 43 will encourage CDFI investment in gap areas around the state and bring much needed capital to small businesses and entrepreneurs. The credit market is still tight, and anything we can do to encourage private sector investment is important to the growth of our economy and the creation and retention of good-paying, family-supporting jobs throughout our state.
State Sen. Julie Lassa, D-Stevens Point, represents the 24th state Senate District.