Big News: North Dakota Opportunity Fund to launch collateral support program

The North Dakota Opportunity Fund (NDOF) Steering Committee voted at its May meeting to create a collateral support program. It is the first ever addition to the fund.

North Dakota Opportunity Fund was born out of the Small Business Jobs Act of 2010, which allowed for the creation of State Small Business Credit Initiatives (SSBCI). These initiatives leverage private financing to help small businesses and manufacturers attain loans and investments needed to expand and create jobs.

Led by the City of Mandan, a consortium of 38 municipalities (see map) was allocated almost $10 million in funding for a loan participation program. Since 2012, the NDOF has disbursed $29.9 million in loan proceeds. 

Lewis & Clark Development Group has managed the NDOF since the program’s inception in 2012. 

Lenders Expressed Desire for Program

The decision to create a collateral support program comes after months of discussion by board members and consortium community leaders. To better guide the decision-making process, the NDOF Steering Committee authorized an online survey of lenders across the state. The survey, conducted in early December, found strong interest in expanding the NDOF to include offering collateral support.

“The strong support and interest in offering a collateral program is, I think, a vote of confidence in the fund. I think it helped committee members in making the decision to proceed,” says Matt Burthold, LCD Group commercial lending director.

“Burthold added the committee did its due diligence by reviewing similar programs in other states.

“There’s obviously no one size fits all approach, but a a collateral program offered through the Idaho Housing and Finance Association checked many boxes for us,” Burthold noted. “We opted to base this new program in part, but not entirely, on Idaho’s model.”

Example of the New Program Will Work

The program will be rolled out in the coming weeks. Plans include the program will establish pledged case collateral accounts with lending institutions to enhance loan collateral for qualifying businesses, helping them obtain financing on acceptable terms and conditions.

Burthold provides the following example of how the Collateral Support Program may help a small business…

$500,000 total project; $485,750 value of total collateral available
$340,025: Lender policy is 70% loan-to-value advance rate
$75,000: Business is able to provide 15% cash equity
$84,975: Funding gap challenge

Solution:
$425,000: Lender loan with an $84,975 Collateral Support Certificate of Deposit (CD)
$75,000: Borrower Equity

“The NDOF has a sterling reputation,” says Burthold. “This new program will be implemented prudently to further enhance the fund and provide another valuable line of support for North Dakota’s small businesses.” 

Click here for more information about the North Dakota Opportunity Fund or contact Matt Burthold at (701) 667-7601 or at matt@lcdgroup.org.