Entrepreneurs and others looking for affordable financing in the Chattanooga area might never have heard of BrightBridge Capital.
Bill Pollard would like to change that.
As chief operating officer, Pollard is on a mission to help businesses start – and stay – in the area. In his 12 years at BrightBridge, he’s also been director of special projects and director of New Markets Tax Credits Operations, so he’s not afraid to get wonky.
And as the city, region and country begin to look ahead and begin plans to dig out from the COVID-19 pandemic, he says now is the time for entrepreneurs and companies, both in existence and so far just on paper, to begin thinking about the capital they’ll need.
Hamilton County Herald: Can you sum up what BrightBridge is and does?
Bill Pollard: “BrightBridge is a 40-year-old, nonprofit economic development organization that assists in providing affordable debt to businesses, other economic development organizations and larger development projects. We work with banks and credit unions to bring creative capital and terms to create jobs and bring needed goods and services to economically distressed communities.
“We were originally formed within the Southeast Local Development Corporation, a quasi-governmental agency, to be a U.S. Small Business Administration lender, in the context of partnering with banks to do owner-occupied real estate lending. About 14 years ago, we spun out into BrightBridge so we could focus not only on SBA business lending but also create some other lending tools to take to the market.”
Let’s talk more about that coverage area. Who can come to you for funds, and where do they have to be located?
“We make mission-based business loans starting in the $25,000 to $50,000 range up to multimillion-dollar project financing. We have done loans in the $85 million range. We work – not compete – with banks and other commercial lenders to connect small and large businesses and projects that are a good credit risk but for whatever reason the banks don’t want to put them on their balance sheet. Sometimes, that’s due to what regulators have restricted in terms of bank activities.
“Our mission is to make good, solid business loans – large and small – and participate with banks so at some point in the future those businesses can get conventional financing and don’t need us anymore. We help them get to a standalone banking relationship because they have matured and stabilized and no longer need the tools we bring to the table.”
What types of lending programs and mechanisms are in your toolbox?
“Over time, we’ve offered three main products. One is supported by the USDA and is only for loans on rural areas of Tennessee and Georgia, and those loans are capped at $150,000. The SBA loans we have are also capped loans, can only be for owner-occupied real estate and have to have a bank partner to take the senior piece of the debt while we take the subordinate part.
“We also are a part of the New Markets Tax Credit program. That is financing for larger projects, those of around $4 million and up. Congress awards federal tax-credit authority to entities like ours, which are certified, and then we monetize those tax credits. We cannot use the money ourselves but rather bring the money and project financing to applicants. And over the past decade or so, we’ve added new products to our capabilities to go alongside those three.”
How have you grown over time in terms of portfolio size?
“About 10 years ago, we had a loan portfolio size of between $17 million and $18 million. Our total loan portfolio across all lines is now $190 million.”
What types of businesses are coming to you for financing assistance?
“It really varies depending on the product line. Because of the transparency of the federal tax-credit program, when we get that allocation of credits, people come to us from all over the country. That one almost sells itself, but I will tell you that unfortunately, in Tennessee, it has not been accepted the way it has been in other states. We’re working to change that.
“We also have banks who come to us. They might have an owner-occupied real estate project that doesn’t quite fit their box due to some sort of debt-service gap or other issue. They come to us, and we can bring our subordinate SBA debt in to work with them and get a deal done. What we’re trying to do better now is market ourselves, let people know that we have access to capital, we’re motivated to get it out and that we’re mission-based and so affordable. We want the market to know we’re here to help – in this case ‘market’ being real estate developers, owners and banks.”
Why would you say Tennessee is lagging behind on the tax-credit program?
“I’d say it’s an education issue. This is a sophisticated program, and I’ll add that Tennessee is not the only state where it has not done as well as it could. Here, that’s due in part to us not having a state income tax for businesses, so there’s not a lot of knowledge about how business taxes work.
“When we go to economic-development agencies or rural developers to sell our state and we talk about this product, we run into two issues: One is that their eyes glaze over, because it is complicated, and the other is fear. They believe this is a Wall Street product and someone is going to come in there and take advantage of them. We’re working to educate them on the benefits, but we remain underserved with this product, and I hope we can change that.
“It also can be a little confusing because we have two subsidiaries – Appalachian Fund for Growth and River Gorge Capital – to handle these funds because the legislation requires that those credits flow through a for-profit organization. We formed those subsidiaries for that purpose, but we own them; there’s no private equity or bank in there. We also staff them, and all the profits move upstream back into BrightBridge to fulfill our mission of economic development.”
This past year has been a challenge, to put it mildly. How has BrightBridge done, and what does 2021 look like for you?
“We haven’t slowed down in 2020, actually. I’d say we always want more business. We haven’t always marketed ourselves well, we’ve sat back and grown organically. That’s been good, in that we’ve enjoyed growth and have more access to capital. That’s been fine for our balance sheet, but too many people don’t know who we are and what we do. We’re getting our story out, and as we do so, we’re building our pipeline of good potential loans.
“A lot of businesses that were around a year ago are, unfortunately, not going to be here next year. But the same people who started them have learned a lot, they know how to do things differently and better next time, and they’re going to be coming back to us. The demand is out there. The issue is going to be when responsible employers are comfortable bringing employees back and serving customers safely.
“We have a healthy, diversified small business economy in the Chattanooga area, and in the state. We have the opportunity to work on so many metro and rural communities, and I think you’ll see small and large businesses growing in the future. We’re well positioned to help them dive into the opportunities that are here.”