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JEFF GRUNENWALD: ”We’ve grown from a small office to a pretty good-sized footprint in the Midwest recycling industry.”

Bringing It All Together

How Brainerd Lakes cities and utilities pooled excess resources to benefit the region’s businesses.

By Gene Rebeck | Photography by John Linn

When opportunity knocks, small businesses have to answer fast.

Jeff Grunenwald knows about speed. He founded his Brainerd-based company, GreenForest Recycling Resources, just a little more than four years ago. The company picks up paper, cardboard and cans from various communities and processes those recyclables for reuse. In addition to its original facility in Brainerd, GreenForest has operations in Hutchinson to the south and Virginia to the north and collects material in five states.“We’ve grown from a small office to a pretty good-sized footprint in the Midwest recycling industry,” Grunenwald said.

With demand surging, Grunenwald needed new equipment to help him keep up. Last year, he had his eye on a specialized machine that could speed up paper baling. But two obstacles threatened to derail his dream.

One was money. He needed a loan to acquire the baler. But banks “require a certain percentage down. I would have to come up with 20 percent,” Grunenwald noted. Since he needed about $80,000 to purchase the baler, this meant he had to come up with about $16,000—no small sum for a newer small business, even a fast-growing one. The other obstacle was time: The loan application process would also require him to take hours away from running the business.

Luckily, Grunenwald’s bank rerouted him to a new loan source. Last year, the Brainerd Lakes Area Economic Development Corporation (BLAEDC) introduced the BLAEDC Unified Fund. The fund pools dollars left over from various grants to the cities and utilities in the region from the past several years. Combined, they create a revolving loan fund with a value of more than $2.8 million.

Not only does the Unified Fund have money to lend, it required Grunenwald to put less money down. And getting the loan “was so fast and seamless—a very easy process to go through,” he said. That speed is one of the drivers behind the fund’s founding.

Into the Pool
There’s been no shortage of money available in the Brainerd Lakes area for small businesses needing funding to expand. “What had happened over the years is that we ended up with a multitude of these small loan pools in Crow Wing County that were complicated and cumbersome to tap into,” BLAEDC executive director Sheila Haverkamp said.

What’s more, many of them weren’t using the money they had to make loans to regional businesses. Haverkamp and other organizations in the region—including the Initiative Foundation— wondered whether there might be a way to gather that money into a common pot. This would not only make these funds accessible to growing businesses like Grunenwald’s, but it would also make accessing them “customer-friendly.” It gets the money to where it’s needed and doing what it needs to do, Haverkamp said—“helping businesses grow, adding jobs and spurring economic activity.”

But to establish this unified fund, Haverkamp and her BLAEDC colleagues faced some challenges. In particular: How would the entities react to loan money going to businesses outside their jurisdictions?

BLAEDC’s strongest selling point here: We’re all in this together. The Brainerd Lakes cities make up an interconnected economy. “In Crow Wing County, the average person travels over 20 miles to work,” Haverkamp said. “People are working, shopping and recreating in various communities. So we all gain by the whole area growing and prospering.”

Having made the decision to pool community resources, BLAEDC worked with an attorney and the state of Minnesota to make sure that the new fund met all of the state and federal regulations to permit “the cities, county, and Housing and Redevelopment Authority to name another entity to be their LDO [local development organization],” Haverkamp said.

Some of the entities’ money was tied to certain programs, which prevented them from transferring it to another organization. But as Haverkamp noted, these entities were allowed to partner with the BLAEDC Unified Fund.

Because of the legal requirements, nearly half of the economic development funds went directly to BLAEDC, “and the remaining funds stayed with the original entity that held the money to begin with,” Haverkamp said.

“We created a partnership where they utilized the BLAEDC Unified Fund to offer loans. They use our applications and approval processes, and our board makes recommendations to their boards. We manage the loan documents on their behalf.”

Paul Means, a member of the Unified Fund board and chairman of RiverWood Bank (which has branches in Baxter and Crosslake), said that the fund “offers an efficient, effective, customer-friendly way for businesses to access gap financing in our area.”

Instead of having individual processes, “today we have a standard application” that is consistent across all of the entities, he noted. The loan applications then are presented to the Unified Fund’s board, which reviews them. The process, Means added, “somewhat mirrors what a local lending institution would set up.”

To get the Unified Fund up and running, Haverkamp and her organization turned to the Initiative Foundation, with its long history of gap-lending experience, to help manage the process.

Dan Bullert, Initiative Foundation business finance manager, said the Unified Fund complements the Foundation’s services and provides yet another funding mechanism in the region to meet business growth and development needs. The partnership, Haverkamp said, “was part of the success in being able to accomplish this.” The Foundation’s support and expertise assured Brainerd Lakes area communities and businesses “that we could deliver right out of the gate with the staff support, knowledge, expertise and software that was needed to manage all of the loans.”

Collecting More
As of March, the Unified Fund had already closed on three loans. One of those was Grunenwald’s. In January, he took delivery of his company’s new baling machine, which can tie up paper, cardboard, plastics, aluminum and steel cans.

“It’s computerized and automatic—one person can load and operate it,” Grunenwald said. “The computer automatically tells the baler when it’s ready to put a bale out. It’s going to speed us up by about five times. And that will let us go after more accounts.”

That’s the kind of response BLAEDC hopes to hear from future Unified Fund recipients. “For communities, the fund is helping to promote and market their pools of money, as well as project vetting and the greater likelihood that the loans will be paid back and reinvested in private sector projects,” Haverkamp said. “It also allows the BLAEDC Unified Fund to secure additional economic development resources.”

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