MoFi, formerly the Montana and Idaho Community Development Corporation, is a Missoula-based nonprofit that provides loans to small businesses and helps growing businesses take advantage of tax credit opportunities.
According to Dave Glaser, MoFi president, the nonprofit specializes in providing loans to small businesses, especially in rural communities, that are "nearly bankable." It also helps larger businesses fund projects through the New Market Tax Credit Program, a federal program that incentivizes businesses to invest in low-income communities.
Founded in 1986, MoFi started as a small community development financing institution, financing small businesses in and around Missoula. The organization began seriously growing its capital in 2007 and grew rapidly over the next few years. It now operates in Montana, Idaho, Wyoming, eastern Oregon and eastern Washington. And it recently opened an office in Boise.
MoFi began working in Idaho in 2011, helping local business with New Market Tax Credit projects. In 2015, it expanded its small business lending for nearly bankable businesses to Idaho.
"There just wasn't a lot of capital like ours in Idaho and I'm so happy to be able to provide what we do," Glaser said. "From the first moment I set foot in Idaho, I've never felt anything except open arms and red carpets because the state is so focused on having a vibrant business community."
In 2015, 16 percent of MoFi's small business loans went to Idaho. In 2016, 50 percent of its small business loans came here and it's been doing about half its business in Idaho ever since.
Glaser recently spoke with the East Idaho Business Journal about MoFi and the businesses it works with.
What is MoFi and what do you do to help small businesses?
MoFi is a non-bank lender that provides capital to people, projects and communities that are outside the financial mainstream, that can't get the capital they need from a bank. In Idaho, we have lots of different financial products, but we focus in Idaho on loans to nearly-bankable small businesses. These are businesses that banks really wish they could finance but they for whatever reason the criteria at that bank, they just don't qualify.
We provide loans to those businesses and then we provide love to those businesses in the form of accountants and marketing professionals that work for our company to make them bankable as fast as possible.
We like to churn our capital and create new bank customers so we can move to the next business that needs us. We do that all across Idaho, Montana, Wyoming, eastern Oregon and eastern Washington.
What makes a business "unbankable?"
Usually it's because they are light on collateral or equity. Those are the two most common reasons. But it can also be because your credit score is slightly outside of what a bank is comfortable with or it could be because the business is a startup — startups are particularly tricky to finance at banks. That's where we step in.
Typically what we see are people who have been to a bank or two or even three trying to get capital for their business and one of those lenders sends that business to us. When you look at the kinds of businesses we're financing, it's all across the spectrum: main street retail, restaurants, industrial/manufacturing companies, medical facilities. There really isn't an industry we don't support.
About 50 percent of our small business loans are to startups. The other 50 percent would be broken down into two general categories, one being a turnaround situation, a company that's had some hiccups but is on the right path to getting back to profitability, and then additionally, businesses that are growing and may not have collateral to borrow against.
What's the first step when you decide to provide a loan to a business?
Eighty percent of the loans that we make come from a bank referral. Bankers know us. They pick up the phone and they call us and say, 'Hey I've got this person I really wish I could help.' We take a look at it, underwrite it and if it's somebody that we're going to make a loan to, we have a loan closing, just like at a bank.
At that same time, we're introducing that business to our 'path to bankability team.' These are the consultants. And the underwriters, our loan officers, establish with the bank — that refers the business to us — what the path to bankability looks like. What do they need to see that business look like for them to be bankable? Then the consulting team comes in and focuses with that business owner on those areas to strengthen them so that they can become bankable.
Is there a recent example of a small business in the Idaho Falls area that you worked with?
Up in St. Anthony, Idaho Burger (Grill). It was a startup burger joint, very hard to finance those. (The owner, Krysten Davis), came from a family of entrepreneurs, her mom and dad both, so she had it in her DNA to run a business — that would be a great example, especially a really rural business like that, they're just really hard to finance.
One of the success factors of the people that we finance is that they are keen to listen to others. 'Tell me what I can be doing better in my business.' That is an attribute that is solid gold because, any one of us, when we're doing our job or running our business, we're going to be missing things, right? You miss the forest for the trees. Somebody coming from the outside and saying, 'Hey you should consider looking at this, this or this,' if you're willing to listen, that’s a big deal.
What are other attributes you look for in a new business owner or business owner who wants to grow?
I would say grit. It's not easy running a small business. I know because I've done it and other people who've worked for our company have, too. We're good at (asking), 'Really, you want to do this? It's going to be twice as long as a normal job. You'll be working late into the night in your garage.' Establishing that grit is something that is a big part of our underwriting.
And then, 'Is it a smart business? Were the projections put together in a way that makes sense? Are you going to be able to sell 15 plates of food for five hours a day? Is there the market for it?' Gritty people who have a good sense of the business they're going to run, or are running, know that off the top of their head and they know where they're headed.
How much does a loan from MoFi cost?
We price our loans higher than the bank. In fact, we're pricing our loans today so that two years from now, when that business is bankable, our interest rate is still higher because what we don't ever want to do is be inverse of bank pricing. We want to have people be motivated to move to the bank. So today it's 9.5 percent APR, which is still a lot less expensive than some of those online lenders or other predatory sources of financing.