Small business owners secure viable funding in rural communities

Alton Porter could feel the growing pains. Stuffed into a snug space that formerly housed a single-chair barbershop in downtown Walthill, Nebraska, his HaWaTay’s Gift Shop & Supplies business had expanded to the point where things were downright uncomfortable.

So when a village official stopped by to peruse the store’s assortment of beads, leather goods, and blankets, Porter mentioned the challenges of operating a growing startup that could use more room.

The official explained that Ho-Chunk Community Development Corporation (HCCDC), an organization based seven miles north in Winnebago, Nebraska, that provides resources on personal and business finance matters, as well as residential, and commercial projects, was adding a new focus on Native American-owned startups and early stage businesses. As Porter researched the opportunity, an appealing storefront opened up across Main Street.

Previously the town’s library, which had moved, the vacant spot offered a potential three-fold increase in retail space plus a storage area. Porter applied for a $40,000 loan, and within months, the deal closed, and he moved HaWaTay’s to the new space the fall of 2018.

Getting beyond traditional lending

“I never really pursued another lender, although I guess I always had the choice to go to the local bank or Wells Fargo or whatever,” Porter said. “But as far as HCCDC being more Native-based, Native-focused, and Native-owned, I think it helped us to get the loan.”

It also helped that the loan was funded through the Community Development Financial Institutions (CDFI) Fund, a federally backed initiative that targets economically disadvantaged towns and neighborhoods that have limited access to funding.

Created in 1994, the CDFI Fund provides a formal structure to community lenders, running the CDFI certification program and helping facilitate private matching that provide as much as 90% of a CDFI’s lending capital. Throughout its history, bipartisan Congressional support has reinforced the program in the face of occasional Administration challenges, and it has certified nearly 1,200 institutions nationwide.

In 2017, $7.6 billion in loans and investments were awarded through the CDFI Fund, 20% of which was directed to non-metropolitan areas such as the rural Midwest.

Having earned CDFI certification in 2015, HCCDC initially funded some personal and real estate loans, and the HaWaTay’s deal was one of HCCDC’s first forays into CDFI Fund-supported business lending.

“Our mission is to enhance economic, educational, and social opportunities for tribal members in Thurston County, and since CDFI provides funding to those who might not be eligible for traditional lending, this helps fulfill our mission,” said Tony Wood, coordinator of Ho-Chunk Community Development’s CDFI business. “In the process, we provided the resources of reviewing the business plan and going over the financials, which a lot of our customers need – that little push and initiative – but it helps put them in a better spot for the loan.”

Located within the boundaries of the Omaha Nation Reservation, many of Walthill’s residents rely on Porter’s business for the beads, feathers, fabric, corn, and other materials they need to make fans, dresses, moccasins, traditional Native American regalia, and other ceremonial attire. Sales pick up considerably during pow wow season, which culminates around Walthill with the annual Omaha Dance, held in mid-August.

“My wife and I looked at what was needed within the community, and since everybody does pow wows and ceremonial gatherings, we wondered where they get their supplies,” Porter said. “We’ve lived in this area our whole lives and nothing local fit that need. So we decided to take out a $20,000 loan to jumpstart it, and everything has been snowballing since.”

Creating a destination location

Situated close to the Nebraska-Iowa border about 80 miles north of Omaha, Walthill faces many of the challenges common to small, agricultural towns across the Midwest. Its population has dwindled from a high of 1,204 residents in 1940 to 780 in 2010, and the grain elevators along the railroad tracks on the east end of the four-block downtown provide the bulk of the town’s employment.

In 2015, the town embarked on a Downtown Master Plan for a district that contains almost as many vacant lots as storefronts. The plan featured suggestions for new retail and residential structures, as well as a reconfiguration of civic spaces such as the village hall, library, and community parks.

“Those were nice startup plans and it’s one thing to talk about those things, but action is different and not much progressed from there,” Porter said.

Notwithstanding the town’s ambitions, Porter and his wife, Elizabeth Porter, opened HaWaTay’s in the fall of 2016 and invested much of their initial loan into inventory.

Their hunch about community demand proved correct, and between sales growth and the larger space, Alton Porter said the value of the inventory he carries has more than tripled, to about $75,000.

In addition to Walthill, Porter said the store attracts customers from nearby Winnebago, as well as Omaha, Norfolk (about 60 miles) and Sioux City, Iowa (about 25 miles). Porter said it’s also become a destination for customers who live more than 100 miles away in Lincoln and Niobrara, Nebraska, as well as Sioux Falls, South Dakota.

The store maintains a Facebook page but otherwise relies on word-of-mouth marketing in the region’s Native American communities. Prior to opening HaWaTay’s, Porter believes the closest brick and mortar outlet for such specialized goods was located about 450 miles away in Ponca City, Oklahoma, although a competing business popped up in Winnebago in late 2018.

“Actually, the demand exceeds what we can carry now,” Porter said. “We’re probably only scratching the surface on our bead selection, fabric is another type of product in high demand, and we could offer more services. As far as regalia goes, a lot of people love to see that made and done so they can just come in and say, ‘I like that set you just made.'”

Support to start and sustain

While Porter clearly had a handle on the market’s pulse, he acknowledged needing some help on the business side of the venture. Through HCCDC, he received advice and guidance on honing his business plan and sharpening the financials. As a result, he sets aside funds for planned long-term expenses while otherwise regularly investing profits back into the business.

“We need to see a viable business plan as part of the underwriting for the loan, and that provides an impetus for us to engage the potential borrowers on determining what technical assistance they need to become loan ready,” said Brian Mathers, HCCDC’s Executive Director.

Mathers admitted that finding individuals interested in starting a business is challenging in the area, “so we’re seeking those who have a germ of an idea for an entrepreneurial opportunity.”

That requires seminars and lunch-and-learn sessions in the communities, as well as tapping the local bankers who serve on the HCCDC Board of Directors and firming connections with the nearby Nebraska Indian Community College.

Such grassroots legwork is common across the country for CDFIs, which also benefit from the unrestricted nature of the program’s grants. For example, after years of serving eastern Nebraska and western Iowa primarily as a micro-loan provider, the Lyons, Nebraska-based Center for Rural Affairs recently earned CDFI certification.

Having navigated multiple capital sources for years, Brian Depew, who is executive director of the organization, sees the flexibility of CDFI funding as invaluable in helping fill service gaps.

“Working with 15 different loan sources, it was a patchwork of geographical restrictions, as well as limits on the types and sizes of loans we could offer,” he said. “But CDFI is a way to fund new programs. Cash is king, and cash with fewer restrictions for a mission-driven lender allows you to be responsive to your communities and their shifting needs.”

As for HaWaTay’s, Porter said that he could see exploring a second location in a larger community such as Sioux City, Omaha, or Norfolk at some point. But for now, he’s focused on surviving past the five-year business threshold as well as supporting his immediate community through the Walthill Business Club.

“Walthill has a common story – a small town that’s dying,” he said. “But our business is located in there, and we’re trying to help rejuvenate Main Street and bring the town back.”