This success story is part of ACC’s series titled CDFI Innovations: How CDFIs Are Fueling Small Business Growth
CDFI: Southeast Rural Community Assistance Project, Inc. (SERCAP)
CDFI Service Area: Virginia, Maryland, Delaware, North Carolina, South Carolina, Georgia, and Florida
SERCAP has combined a variety of federal and state funding sources, including USDA’s Intermediary Relending Program, to develop a Small Business Loan Product that is flexible, affordable, and meets clients wherever they are on their entrepreneurial journey.
“EarthMagic has been my dream for a long time. The technical assistance and loan I received from SERCAP played a critical role in making it into reality. That support is enabling me to tap into multiple growing markets, secure additional contracts, and grow my business, all while protecting the environment and making a difference in my community.”
– Kathy Wirtanen, EarthMagic Recycling.
Kathy Wirtanen has long been passionate about protecting the environment and repurposing things to reduce waste. It wasn’t until the COVID-19 pandemic brought the growth of recycling and using recycled items that she became determined to transform her passion into a business.
SERCAP’s Small Business Loan Product helped Blindhouse Beer in Roanoke, Virginia, finance the costs of their licensing, the rental of their warehouse space, and supplies like wine barrels, barrel racks, a pump, and their bottling line.
Photo Credit: Tyler Wert
Now, thanks to support from SERCAP’s Small Business Loan Product, Kathy is the proud owner of EarthMagic Recycling in Buena Vista, Virginia, which collects food and beverage glass and recycles it into sand products. The products are used as abrasives, utility sand, recreational sand, decorative sand for crafting, and more. The sand products are 100% post-consumer recycled material.
SERCAP regularly hears of entrepreneurial ideas like Kathy’s all across its seven-state service area and sees the need for financial and technical assistance to make those dreams into functioning, profitable businesses. That’s why the organization created its Small Business Loan Product in 2016. Through this program, SERCAP provides loans of up to $100,000 to small businesses in rural communities with populations of 50,000 residents or less. Both existing businesses and start-ups are eligible, with larger loan amounts for applicants that have been in business longer or that have received technical assistance from SERCAP or other providers.
SERCAP has been able to grow its Small Business Loan Product by tapping into various federal and state funding sources. To applicants, it’s one seamless program – but behind the scenes, SERCAP staff are examining the different funder requirements and identifying the best fit for each project. Among the funding sources used is USDA’s Intermediary Relending Program (IRP), which has been a valuable addition to SERCAP’s toolbox.
Through IRP, SERCAP received a $1 million 30-year 1 percent interest loan from USDA, which it can re-lend to businesses on its own terms. The IRP is a revolving loan, so SERCAP can continue to make loans as funds are repaid for the duration of the 30-year term. USDA requirements can be more complex than some small businesses are accustomed to, so SERCAP staff work closely with applicants to meet them. These requirements include location in an eligible rural area, registration on SAM.gov and for a DUNS number, environmental review, documentation that financing cannot be obtained elsewhere, and ultimate project approval.
SERCAP has also adapted to meet its small business clients’ needs by modifying how it defines collateral. Staff work with applicants to document what they plan to purchase with the loan funds, and the businesses provide proof of purchase afterwards. Using future purchases as collateral in this way allows SERCAP to reach newer start-ups that may not have other resources to secure the loans.
Additionally, SERCAP provides small business advisory services. These services are tailored to the needs of clients and include market research, business plan development, financial analysis, and training and consulting on bookkeeping, cash flow and inventory management, feasibility analysis, marketing, pricing, and more. SERCAP offers these services through multiple channels including classes and workshops, webinars, one-on-one consultation, and an online learning platform. Participation in these services not only strengthens the profitability and sustainability of a small business, but it can also qualify the business for a larger loan from SERCAP.
Small businesses across SERCAP’s service area have used the Small Business Loan Product to finance working capital, inventory, property acquisition, energy efficiency projects, financial management systems, and more. In EarthMagic’s case, Kathy first became familiar with SERCAP when she received technical assistance from the organization’s Business Development Manager, which led to her receiving a Platinum Award through the Advancement Foundation’s Gauntlet Business Program and Competition. She then applied to SERCAP for a small business loan and was selected. She used the loan to pay off an existing business loan, purchase equipment, and build working capital for her business. With this support, EarthMagic Recycling is achieving its vision of protecting the environment and making a difference in its community, one piece of glass at a time.
