How to expand your northwestern business.

It is a sign of the times.

Corporate thinking, particularly in the banking sector, is that one-industry towns are high-risk investments, according to a Northwestern Ontario Associated Chamber of Commerce (NOACC) article.

When bankers hear how Northern Ontario is "dying" as a result of forest sector challenges, it does not take a genius to figure out why lending institutions are reluctant to approve loans, Mary Long Irwin, president of the Thunder Bay Chamber of Commerce, says.

Rural or one-industry communities in the northwest are experiencing a decline in funding support from traditional lenders, the NOACC report states.

Some of the chamber members say it is because decision making has been transferred to large, urban centres, while others attribute it to the one-horse town syndrome.

Long-Irwin says0 it is a mixture of the two.

Establishing a business in some northwest communities is based on more of a need than a want, since most remote community residents do not have access to products or services outside their district.

"Unfortunately the withdrawal of financial support to businesses in these communities is causing businesses to close or never start," the NOACC article states.

This is setting off a chain reaction. The more businesses fail, the harder it is to attract new people to the northwest, particularly skilled or knowledge-based professionals.

As a result "citizens move out and the community begins to die."

Even though Sioux Lookout/Hudson area is one of the few communities that experienced growth in the last census, a number of area business owners cannot obtain loans for expansions.

"Unless you can finance it out of profits from the business, what do you do," says Sioux Lookout economic development officer Ted Couch.

Banks are not interested in involving themselves unless the owner or entrepreneur has a 25 percent down payment and they have to want to borrow $150,000 or more.

"The risk requirements are worse now than they were before," Couch says.

But because Long-Irwin has worked with community lending institutions before, she understands bankers are trying to protect their stakeholders.

"That is what is making it a challenge."

This was one of the fundamental reasons for developing the Grow Bonds program, which has since been adopted by the province.

"About 40 or 50 percent of your business can come from Grow Bonds," she says.

To date, there is well over $10 million in Grow Bond pool. Applications have been submitted and are being reviewed by northeastern and northwestern Ontario members.

Community credit unions can be a good alternative if Grow Bonds aren't the right tool for a given business, Couch says.

And as a last resort, Couch says, look to FedNor via the local Community Futures Development Corporation (CFDC).

www.mndm.gov.on.ca/growbonds

By KELLY LOUISEIZE

Northern Ontario Business