When credit dried up after the financial markets collapsed in 2008, small business owners knew they needed to adapt or watch their businesses disappear.
Small towns were in a similar situation. In Bowdoinham, ME – a town of approximately 3,000 – residents wondered what would happen if peak-oil prices continued to skyrocket and the economy didn’t rebound. Would the uniquely-blended town of farmers, artists and private sector workers lose its identity? Or worse?
A small group of community members came together to discuss these concerns and possible solutions. The founders of what would become the Bowdoinham Community Development Initiative quickly realized that talk is cheap and the best way to help the community was to just do it.
During one of the first meetings, while attendees were trying to iron out the details of what they would do if the economy collapsed further, local farmer Pete Engler stood up and told the group he was sick of talking and just needed a tractor.
He already had a tractor picked out from a neighboring town and could drive it back, but he needed $7,000. The foundation of BCDI was then born.
BCDI found 12 willing investors throughout the community to put up the money and two weeks later that farmer was BCDI’s first loan recipient. He got his tractor and paid back the loan three months before its due date.
BCDI does require collateral against its low-interest loans, and it has fulfilled nine loans for over $50,000 during the past year and a half. All of those loans which have come due have been paid back on time or ahead of schedule. BCDI has grown into a valued community organization and is receiving support of residents. On June 11, residents voted in favor of a warrant article that granted Town support of BCDI for $5,000.
It hasn’t always been smooth sailing though. Former board member and now a consultant-manager for BCDI, David Whittlesey, said the group initially didn’t want to involve lawyers to avoid hitting a legal wall before the organization built any momentum.
BCDI was able to register as a non-profit with the state of Maine. However, when meeting with Maine’s Office of Securities, BCDI discovered that it needed to make some changes. Luckily, the group already had a track record to show what kind of work it was doing. The Office of Securities was excited about the organization and helped BCDI comply with the laws. Now, Whittlesey is proud to say BCDI is fully compliant and was also granted 501(c)(3) status with the IRS as a public charity, after a 14-month long process.
He’s also proud to say there are over 70 members in the organization this year, which is a big jump from the 20 or so people who were involved in the early months of the organization and the excitement is still growing.
"The last loan we had was a farmer who wanted to build a Rimol Greenhouse. The loan was fully funded within 24 hours,” Whittlesey said. “So I think there is a certain recognition and enthusiasm for maintaining this.”
Whittlesey said the biggest problem is that the organization needs a non-volunteer to run it, so funds must be raised in order to maintain BCDI’s sustainability. BCDI has raised money in various ways such as: a sliding scale fee structure for members, money from the town, interest rate differential on the loans, charging a fee for services provided, and grants.
BCGI received a $2,000 Grow grant in 2013 from the New England Grassroots Environment Fund.
"We were very pleased to even be able to apply for the NEGEF grant because most of the grants that are available for this kind of thing require you to be 501(c)(3) before you can apply,” Whittlesey said. “That long delay (with the IRS) prevented us from applying for grants, which we now can, so that’s helpful.”
Whittlesey knows that in order to keep the program going, BCDI will have to keep enthusiastic investors like Dwight Sholes involved.
Sholes, a seven-year resident of Bowdoinham and member of BCDI since its inception, wanted a way to invest his money locally and BCDI provided the perfect opportunity.
"We do a lot of investing all over the place and a lot of charitable giving in different parts of the world, and we really wanted to start doing more close to home,” Sholes said. “Bowdoinham is a really great community, and we really like the idea of being able to leverage funds to help our neighbors to do things to improve the overall community. It’s just a great way to put money where you live.”
Sholes, who works in online marketing for travel companies, thinks at first glance the vast differences between residents would seem like a liability when in fact it’s one of the town’s strengths.
"Where would the food come from if we didn’t have farmers? But where would the farmers get capital if it wasn’t for people like us who were here in town and able to invest in some of the stuff they are doing?” Sholes questioned.
The second question was a big reason BCDI was created. Because credit has been tight over the past several years, it’s been difficult for small farmers to receive loans from banks in order to make necessary capital purchases. BCDI brings borrowing money back to the good old days and 37-year resident David Engler appreciates that.
"I would characterize it as old-fashioned community banking at its finest, when institutions made loans based on character and need, and not just a set of arbitrary financial criteria,” David Engler, BCDI member and father of the first loan recipient, said.
Another aspect Sholes likes is how it’s open to anyone whether if an investor wants to donate $50 or $5,000. It’s a way to invest directly into the community and create sustainability and invest in things to make life better in your own backyard. Members receive their original investments back plus 2 percent interest.
"I don’t think anyone is doing is for the financial return. I think they’re doing it because they want to be able to build the community and make the community stronger,” Sholes said.
BCDI’s loans have created some unplanned bonuses as well, further strengthening the community from the very first loan. Instead of paying back the 1 percent interest due to BCDI, the organic farmers who needed a tractor donated plant starts to Bowdoinham Public Library for the library’s plant sale, which generated income for the library.
If another town wants to create something similar to Bowdoinham, Whittlesey has simple advice – discuss the community’s specific needs and then just do it. For more information on BCDI, check out its website.