Limited access to a reliable internet connection, widely understood as the “digital divide,” is an obstacle facing rural Americans as they strive to achieve economic and educational parity with their urban counterparts. In an effort to bridge the divide (with the additional benefit of receiving CRA consideration), community banks across the nation are being encouraged to finance broadband infrastructure.
Just a few months ago, ICBM brought you the story of a partnership between two community banks that led to the development of a broadband cooperative that serves rural Renville and Sibley counties. Likewise, Falcon National Bank in Foley has utilized its SBA lending expertise to finance numerous digital projects, including cellular and fiber optic expansions to the benefit of homes, businesses and local schools. Falcon National Bank was featured by the OCC in its Community Developments Investments newsletter for its support for rural broadband on Nov. 26.
“As a community bank, we really focus on trying to help the communities that are surrounding us,” said Jessica Bitz, Falcon National Bank’s market president, who has, since 2009, worked with Palmer Wireless on seven SBA loans totaling $1.2 million.
Falcon’s first loan to Palmer Wireless, then a small, Clear Lake-based telecommunications company, was for $50,000. The company had already been turned down by a large bank that had an office in St. Cloud. “They looked at us like we were crazy,” said Laura Kangas. She and her husband, Albert, who had decades of experience with a cellular phone company, are the founders of Palmer Wireless. “Nobody understood what we were trying to do,” she said.
Nobody, that is, except a bank invested in the success of the broader community. When Bitz took time to understand the company’s business plan and evaluate the owners’ commitment to the needs of the community, she determined that Palmer Wireless was in a position to address a key economic development need. As a result, Bitz said the bank looked at the loan requests from a different perspective. They asked themselves, “how can we make this work?”
The key was reducing credit risk by securing SBA 7(a) loan guarantees. On their first loan, the bank took out a lien on equipment owned by Palmer Wireless and a second mortgage on the owners’ home. “It was a little riskier project,” Bitz explained.
But the risk paid off. Between 2009 and 2014, Falcon Bank financed the development of the wireless connections that Palmer made between existing cell towers and rural residences and businesses. It also financed the cost to wire 20 school busses with 3G/WiFi modems so they could become “rolling study halls,” giving students a jump-start on their homework. The bank also financed the school district’s connection to a 170-foot cellular tower built on a school campus in Becker; the tower doubles as a light tower for the soccer field. The bank also financed expansion of fiber-optic service, which brought high-speed internet to underserved communities along a 60-mile stretch of MN Hwy 10.
Bitz’s advice to rural bankers doing business in communities underserved by broadband: “Take full use of the federal and state programs available to you.”