With $8 million in its coffers, the Nickel Basin Federal Development Corp.’s annual budget isn’t big, but it’s effective. The corporation is a high-risk lender that loans money to entrepreneurs and business startups after the bank has said no.
Based in Sudbury, the corporation is one of several non-profit money-lending institutions across northeastern Ontario that provides financial support to small and medium-sized businesses that otherwise might not have access to funding.
“Generally you have to be declined by your financial institution because we don’t want to be competing with the banks,” explained executive director Rainer Paull. “Then we’ll sit down and talk to people.”
Assistance is offered in the form of commercial term loans, loan guarantees, or equity financing, with the ultimate goal of creating employment in the city.
Two years ago, Nickel Basin provided $600,000—pooled from the partner organizations—for preferred shares in a company that was under threat of buyout by an American company. Because of the corporation’s actions, the company was able to leverage more funding from the bank, and 64 jobs stayed in Sudbury.
But even as a high-risk lender, the standard criteria for money lending apply. Potential business owners have to have a solid business plan that outlines what market their business will serve, their product or service, and their financial projections.
Good management is an equally important indicator, because “good management will get you through the rough times,” Paull said.
“You can do a loan and be secured all over the place, but if the management’s no good, you’re going to end up having to liquidate assets, which is a real pain because you’re never going to get your money,” he said.
In good times—like now, when a flurry of activity related to mining has boosted the economy—Nickel Basin’s role is actually diminished.
But if there’s an issue at hand, it’s that clients are now fighting to keep employees who are lured away by larger companies who can offer a better wage, Paull said.
It’s a “fierce fight” to keep skilled workers on the payroll, but Nickel Basin can help by working with clients to find a solution that lets them keep the business until the situation improves.
“We help them in the sense that we’ll look at renegotiating their loan, going with an interest-only payment for a year, rather than principle and interest, so they can work through it,” Paull said. “We’re a lot easier to deal with than a bank.”
The range of businesses served by the corporation is vast. Loans can range from a $10,000 loan for a one-person craftsman’s shop to a $500,000 loan for a $20-million-a-year company. Nickel Basin often teams up with other money-lending organizations, such as the Northern Ontario Heritage Fund Corp. to help businesses get the leverage they need to move forward.
Paull said memorable accounts, aside from the $600,000 loan that saved 64 jobs, include a young luthier (guitar maker) whose aim was to open a small business and remain in Sudbury, and a mining-related company whose owner was turned down by his bank, only to come to Nickel Basin for help. That business owner now has 16 employees, and mining companies are lining up to sign contracts with him, Paull said.
If there’s one area in which Paull would like to expand, it’s mining.
“I would like a larger limit so we could do more in the mining supply companies that are around that could use $250,000 to get to the next level to go from four employees to eight or nine,” he said.
Business owners can be knowledgeable and financially sophisticated, but sometimes success is really all about timing. If they have a great idea that doesn’t work out immediately, Paull urges potential business owners not to be discouraged
“It’s a process,” he said. “Sometimes you can have a good idea and you want to do something, but it may take two years of commercial credit to actually have it happen.”
