Despite constrained resources, community finance organizations shaping future of rural, northern Canada

“We're able to find entrepreneurs that may have faced challenges beyond the balance sheet.”

Why It Matters

Northern and rural Canada face unique economic challenges, and while the community finance landscape in these regions is limited, community needs are high. Here are three intermediaries finding creative ways to fund ventures and grow local ecosystems.

Image of agricultural activity
Rural and northern communities face higher needs but have fewer options for funding – but intermediaries are finding new and creative ways to ensure local ecosystems grow. (Canva/Supplied)

This journalism is made possible by a partnership with Catalyst: Community Finance Initiative. See our editorial ethics and standards here.

In the 1990s, in Blyth, Ont., the world-renowned Blyth Festival Theatre hit a financial wall, with the banks recalling the theatre’s operating loans.

The small village faced the possible loss of their cultural hub, where stories of rural Canadians often took centre stage.

The theatre contacted Community Futures Huron, a federally-funded initiative providing small business services to rural and remote communities. Founded the same year, Community Futures Huron agreed to give the theatre a loan, and within a month or two, the Blyth Festival Theatre was up and running again. 

The theatre was one of Community Futures Huron’s first-ever loans. Over the past two decades, the organization has invested more than $35 million in economic development initiatives, partnering with more than 400 projects across its rural community of about 59,000 people. 

Both rural and Northern Canadian communities grapple with unique economic challenges, from high living costs, dependency on resource-based industries, and limited access to financial services. Entrepreneurs in these regions are often underserved by traditional banking, making securing the loans needed to scale their businesses difficult. 

Community finance funds like Community Futures Huron grow local ecosystems by providing alternative forms of funding. However, those funds aren’t without challenges; limited resources and smaller populations make expanding difficult. 

Jaret Slipp, former executive director of Yukonstruct Society, is part of the team behind Yukon Place-Based Fund, developing an angel network across the region. 

Yukon has a population of around 40,000 people, and in 2020, it had the third-highest household median income in Canada. “People have expendable income and a desire to help local businesses grow,” Slipp said. The issue, however, is knowing who those individuals are. 

“There isn’t really any kind of collective where new investors can get involved with a community of people looking for deals.” 

That’s where YCIC comes in – creating an angel network to set the foundation for opening a fund in the future, attracting investors and entrepreneurs searching for private capital. But with only 40,000 people in the region, there’s a risk of having few investment opportunities at any one time, especially compared to funds in the south. 

“Funds down south often are very specific about what they’re targeting — for example, you’re going to be looking for high-growth, clean technology companies,” Slipp said. 

“For us, we have to be all things to all people, to be open to a larger amount of deal flow.” 

YCIC hopes that the fund can eventually support different segments of the business sector. He shared the example of a woman and First Nations-owned soap company looking to move into internet sales. 

“These companies may never, ever grow into large companies, but they need access to capital, and accessing traditional capital through loans and banks is really difficult for small businesses like that,” Slipp said. “There’s not as much flexibility, and the terms aren’t as favourable.”

Community finance can be much more flexible, offering revenue-based loans without a fixed payback schedule, with repayments based on a business’s sales. It’s a great deal for the community and investors, but it doesn’t come without potential pitfalls, said Slipp.

Community finance funds accept a far greater risk than big chartered banks by supporting businesses that don’t fit the traditional investment model. Despite this, they still face many of the same challenges as big chartered banks, mostly recently including pandemic-related economic pressures. 

Over the past 30 years, Community Futures Huron has weathered economic ups and downs, withstanding recessions in the 1990s and 2008 and today’s economic downturn. 

Paul Nichol, general manager of Community Futures Huron, admitted that, in the near term, the fund may get a little more risk-averse. 

“We need to be sure that we’re there to always support [businesses] as they’re bouncing back,” Nichol said. 

Even before COVID-19, the demand for loans at Community Futures Huron was outpacing the fund’s ability to keep up. 

“We were actually afraid that we were going to run out of money and not have any money to lend,” Nichol said. 

Partnering with a local foundation, they created the Huron Entrepreneur Fund. The foundation takes donations for community projects, and while it allocates money through grants, it also sits on idle funds, which it invests into the Huron Entrepreneur Fund, giving Community Futures Huron extra resources for lending. 

During the pandemic, this allowed Community Futures Huron to invest $1.8 million through interest-free loans, helping 85 businesses in total. Seventy per cent of those businesses paid back their loans. Six businesses closed and have fully paid or are paying out their loans, while a handful are in default.

“Our loss rate is less than 10 per cent, which means 90 per cent of those businesses are still going strong,” Nichol said. 

“Considering that we were providing money to businesses that were already struggling, I think that’s remarkable.”

Many businesses that Community Futures Huron funds come to the organization as referrals from chartered banks and credit unions. 

“They will say, ‘this one’s just a little bit beyond our comfort level,’ or ‘this one doesn’t quite fit the rules for us,’’’ Nichol said. 

Where big banks require collateral to the loan’s value, most Community Futures Huron’s loans don’t require collateral behind an entrepreneur’s personal guarantees, focusing most closely on their business plan.

“We’re also very patient in our capital,” Nichol said, adding the team has the flexibility to work out repayment plans that make sense for its clients, whether that’s a three-year plan or 10. “The last thing we ever want to do is cause clients debt stress.”

Despite its successes, Community Futures Huron is dealing with a potential slowing of new investors. 

“We’re hearing that there are individuals in the community that are not interested in providing money directly to Community Futures because they want to have much more control [around] the businesses they wish to support,” Nichol said. 

While the Board is an excellent steward of one-time federal funding coming into Community Futures Huron, “there’s a difference between being a steward of money and investing your own money.” 

The team is seeing traction with local foundations making direct impact investments into businesses that Community Futures Huron works with, said Nichol. While it’s going well, in both cases, “you’re dealing with boards,” Nichol said, and individual investors have less control over where the money goes.

“I believe that’s why there’s a reluctance to get more involved with operations like ours.”

Like with any social impact organization serving a community, community finance funds must make funding decisions that are equitable and inclusive, especially for marginalized communities. 

By partnering with Social Venture Connexion (SVX) as its funding arm, Eastern Ontario-based Bloom Local Food Fund, focusing on sustainable food systems and agriculture, freed up its team to focus on building deep relationships on the ground.

Katy McIntyre, fund manager with Bloom and Kevin Taylor, associate director at Social Venture Connexion. (Supplied)

Kevin Taylor, associate director at SVX, strives to source deals outside traditional channels by developing and strengthening relationships with Indigenous communities, diversity-led business groups, and local Community Futures organizations.

“There’re so many [entrepreneurs] out there that don’t know about Bloom and don’t know where to find the capital that we can provide,” he said. That’s where people like Katy McIntyre, a Bloom fund manager with an active community presence, come in.

“Because of our partnerships, we need to get good generative returns that work for investment partners, but we’re also able to find ventures and entrepreneurs that may have faced challenges beyond the balance sheet,” McIntyre said, including women, BIPOC and gender-diverse entrepreneurs, who are less likely to receive traditional investment dollars. 

Bloom offers patient and flexible business capital, taking either debt or equity. “[It’s] capital that reflects the needs of your food-based business, that isn’t going to … lock you into something,” McIntyre said.

Thanks to the province’s large population and abundant natural resources, Eastern Ontario’s strength is in the agricultural sector. However, McIntyre said there isn’t a developed opportunity funnel for investors or social entrepreneurs to connect. 

On top of the lack of community finance networks, there are restrictions on who can invest in funds like Bloom. 

While accredited investors or wealthy individuals can easily invest, due to security regulations within private capital markets, it’s much harder for retail investors and people with more average incomes to get involved. 

“If we really want to democratize the impact investing space, we need to figure out how to allow anyone in the community to invest $200 alongside institutional investors writing $200,000 checks, all under the same terms,” Taylor said.

He acknowledged that it’s not easy: the cost of transactions would have to be reduced, data security would need to be improved for digital platforms, “and most importantly, [we would need to] update the regulatory framework to allow it — but it would be awesome,” Taylor said. 

“In my dream world, we could see local investors capitalizing local investment funds in whatever way is appropriate for them, based on their own financial situations,” Taylor added.

Slipp has a similar dream for YCIC. “Typically, to get into [larger] funds, you might need a minimum of $50,000 to invest,” he said. “There [are] a larger number of individuals that are new to investing, [who] have smaller amounts of money [than $50,000 to invest].”

He aims to mobilize stagnant capital in the territory and individual family dollars to get companies off the ground. 

After that, Slipp hopes successful entrepreneurs will return to YCIC to start another business and support other emerging entrepreneurs. 

“Another major impact we’re hoping for is being able to have an intermediary [for] Southern funds that are looking at investing in the North, bringing external capital into the territory [to] boost that ecosystem.” 

For Taylor, the more that community finance organizations across Canada work together, the more opportunity there will be for deal-sharing, risk aggregation and solidifying best practices, “allowing organizations to get capital into the hands of the folks that need it, in the communities that are being served,” Taylor said. 

There are countless community finance success stories across Canada, with potential for many more. 

Community Futures Huron funded another theatre, Huron Country Playhouse, during the pandemic. 

“They were scrambling to maintain operations,” Nichol said. In the end, the theatre paid back the loan in full. 

“It’s almost invaluable — you can’t put a number on it, that intelligence about what will work and what will not work in the local community,” Nichol said.

Looking to the future of Bloom, McIntyre said that access to more capital benefits Eastern Ontario and that “the things that we learn in Eastern Ontario can ripple across other provinces to other funds and ventures who are trying to explore how we can review and reassess how capital is allocated — and vice-versa.” 

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  • Nickie Shobeiry

    Nickie is a Canada-based writer, film and radio producer, and a journalist covering social impact and culture. She also runs her own comms business, offering copywriting and copyediting services to clients like Globe Content Studio (content marketing division of The Globe and Mail).

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