June 19, 2019

FAME and the region

Northeastern Maine businesses looking for the edge in competition, but unable to come up with all the financing they need to invest in new technologies, have a potential new source of capital in a program approved last year by Maine voters.

The major problem locating the funds is that they’re in a place not many businesses in this region have looked: the Finance Authority of Maine (FAME), an agency that makes headlines for handling big borrowing packages but actually has far more small loans — hundreds, totaling $114 million.

A 1994 referendum established a revolving $10 million loan fund that initially should spin out $30 million in new investment across the state. Under the supervision of FAME, regional public agencies will distribute funds in their area to business borrowers who can come up with $2 from private lenders for every $1 backed by the state.

The program recognizes that the historic strength of the Maine economy is in its small businesses, and its future energy will come from advances in technology that refine manufacturing processes and add value to resources.

The focus of the loans is on companies with fewer than 50 employees whose processes have high-tech potential, including biotechnology, aquaculture, information systems and defense conversion. Businesses can be expected to hustle hard for the opportunity to participate.

Northeastern Maine, however, the geography from Lincoln north (with the exception of parts of Aroostook County) and north of Waterville, is a FAME anomaly. There’s very little borrowing activity here with the agency. Other portions of the state rely much more heavily on the lender’s menu of loan offerings. As a result, areas to the south may be more likely to take advantage of the new program.

Figuring out what’s different in this region would be instructive and valuable if it helps bring qualified potential borrowers into FAME’s loan portfolio, and stimulates job growth.

One difference in northeastern Maine is the unusual strength and number of small banks that place a premium on customer relationships. They deliver personalized services and know their local businesses. State guarantees often are unnecessary in communities where a small-business borrower and bank know each other well and have established a pattern of flexibility, understanding and successful repayment.

For larger projects, northeastern Maine has relied heavily on tax-increment financing, not FAME loans, to leverage capital and encourage investment. Brewer Automotive Components (Lemforder), Shaw’s proposed supermarket in Bangor, the mall in Presque Isle and many other projects are TIF propelled.

The downside of this history may be that local banks, communities and businesses simply aren’t familiar with FAME and what it can do.

With $30 million on the line, and the potential for businesses to work with municipalities, regional development corporations and community agencies to stimulate the right type of business development and employment, the region would be wise to take a long look at FAME and this economic development loan program.

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