Partners, providers, and progress
Celebrating the wins, laying out the challenges in the push for sustainable child care solutions
A Real-Life View of the Crisis
Shawntel Gruba is well-versed in the joys and difficulties of child care in northeast Minnesota.
The native northeast Minnnesotan had two decades of experience in early childhood education before opening Iron Range Tykes Learning Center seven years ago. She knows her chosen profession is vitally important to a rural region where child care is tough to find. Yet, she says, this is an industry on the edge.
“The need is huge, my team is so dedicated, and families we serve are grateful to have quality care,” said Gruba. “But it’s incredibly hard to make the math work.
Her Mountain Iron, MN, center has space for 90 children … and a perpetual two-year waiting list. This is the reality in most rural communities where access to affordable, quality child care is in crisis.
Providers operate on razor-thin margins while their clients struggle to find care and pay for it.
Gruba and her business partner, center director, Katie Mitrovich, both parents themselves, understand the plight of families. Federal affordability guidelines suggest child care should cap at about 7% of household income. Gruba says, “I know people paying two, three, even four times that. People are being squeezed out of the workforce.
“Rising operating costs get passed on to families. This is a highly regulated industry. You can’t cut corners to keep the lights on and make payroll,” Gruba explained.
We’re on a mission
“Support for small businesses has always been part of our mission, because when the economic base is stronger communities as a whole do better.” —Tony Sertich, Northland Foundation President
The Northland Foundation made its first business loan in 1988 with a vision to help more businesses “get up and go” in northeast Minnesota. The late 1970s and early 80s saw shifts in the region’s economy. More locally owned businesses could help revitalize rural communities as big-industry employers began to shrink, but to make it happen, entrepreneurs needed greater access to capital.
Enter non-traditional resources (as opposed to banks or credit unions) like Northland, which could complement what existing commercial lenders were doing. Some of the advantages our program adds to the mix are:
- less restrictive loan policy around collateral or other lending requirements,
- flexibility and cost-consciousness,
- more nimble process, often turning approvals around faster without a lot of red tape, and
- willingness to fill gaps, for example, when a borrower faces cost over-runs, we may be able to come in with additional credit.
Teamwork makes the dream work
“Child care centers operate on razor-thin margins. Rising costs get passed on to families—those lucky enough to find a spot for their children—adding to their financial burden. In too many cases, working families are having to leave the workforce because there are no openings near them or the cost is more than their household can bear.
It’s not that I have extra time and energy on my hands to advocate for the child care profession. I speak out in northern Minnesota and in St. Paul because we desperately need legislators to understand the realities providers and families face, be inspired by our stories, and use their legislative power to support this critical industry.” —Shawntel Gruba, CEO, Iron Range Tykes
Collaboration is the name of the game. For most projects, Northland is one of two or more lenders contributing to a loan package. Even in the case of making a direct loan to a borrower, our part is often just one piece of the total financing. For example, a Northland loan might cover equipment purchases while another lender covers working capital.
“Northeast Minnesota today has a really solid network – credit unions and banks, and other non-traditional sources like ARDC, Entrepreneur Fund, Duluth 1200 Fund, and Northspan. We’re all working toward the same end: to help borrowers get what they need. Often, that takes multiple partners,” stated Michael Colclough who leads the foundation’s Business Services Program.
Will build (a loan) to suit
“We push to be that ready and willing partner who will find workable solutions for borrowers.” —Michael Colclough, Business Services Director
Loans usually range between $50,000 and $500,000 but the amount and form vary. It could be a direct loan that we originate, a participation where we purchase part of the loan from another lender, or even a loan guarantee which helps maximize the amount a borrower will qualify for from their primary lender.
Our staff work closely with the business owner and/or other lenders involved. There’s no such thing as a cookie cutter loan; every set of circumstances is different. What are their strengths and weak points? How about market conditions? What financing will meet their needs at terms that will be manageable?
“It’s a lot of analysis and a little gut feeling,” said Colclough. “This program was built on being approachable and responsive. We really do work hard to say yes.”
So far, the foundation has “said yes” nearly 800 times to the tune $80 million in loans to borrowers all across the region.
Money in to lend out
Maintaining the ability to lend $1-to-$3 million each year, with flexible terms and higher chances for loan losses, is a balancing act.
Northland leans heavily on loan capital from outside sources to distribute in our region, mainly from government entities like the U.S. Department of the Treasury’s CDFI Fund or the State of Minnesota. Funds to lend can also come from banks as part of their commitment to community development or, more rarely, through a Program Related Investment (low or no-interest loans) from a foundation.
Fundraising is critical, but so is wise program and loan portfolio management. Northland’s staff and Board of Trustees prioritize both to ensure the program will continue as a regional resource long term.
Targeted loan opportunities
“When leasing a space it can be hard to get financing. Without this kind of support, I could not have made my dream come true. I am so grateful.” —Nevi Mariadi, Owner of Bali Asian Cuisine, Duluth
The past few years have seen a major influx of funding targeted for more specific uses. The foundation has applied for and received both state and federal support to funnel toward eligible projects. Some of these more focused opportunities include:
- Emerging Entrepreneur Loans which leverage capital from a DEED program designed to increase business growth in rural and more economically depressed areas and among businesses owned by veterans, women, minorities, people with disabilities, LGBTQ+ individuals, and people with lower incomes.
- Construction & Rehabilitation Loans that offer financing of 3-to-5% for eligible business projects involving land purchase, development or redevelopment, site preparation, renovation, and more.
- Kiva Loans which are originated and serviced by Kiva, an international nonprofit, use their online platform to crowd-fund loans up to $15,000. Northland became a Kiva Trustee to help small businesses in our region decide if trying for a Kiva micro-loan is a good option for them and prepare to apply.
What comes next
The program is always adapting and growing. One example is the recent decision to resurrect Quick Turn Loans (coming soon!) which first debuted in 2012. The past few years have also included more intentional relationship-building to reach more pockets of the region and a wider diversity of borrowers and business types.
Closing a deal that helps a new entrepreneur take their shot or an established one ride out a storm or expand – and knowing how this ripples out to impact employees, their families, and the surrounding community – drives us forward.
For more details on what the Business Services Program has to offer, visit our website or contact Amanda Vuicich, Small Business Lender, or Michael Colclough, Business Services Director.
Thanks to our Technical Advisory Committee
A crucial component of Northland’s loan program is the Technical Advisory Committee, or TAC, which is made up of lending professionals from around the region. They meet on an as-needed basis to review proposed loan deals, give feedback on structure and risk, and help vet projects before they move on for final approval by our Board of Trustees. The TAC is a “team behind the team” helping keep the program on course.
- Chad Curran, National Bank of Commerce
- Brian Forcier, Titanium Partners
- Greg Hoag, Security State Bank of Hibbing
- Carter Karpinnen, First National Bank of Moose Lake
- Jaron Larson, North Shore Bank
- Connor Randall, Bell Bank
- Lisa Wigand, Bremer Bank (retired)
We greatly appreciate them volunteering their time to support our staff, board, and small business borrowers region-wide.