Hicks on Biz: Funding aboriginal business BY GRAHAM HICKS FIRST POSTED EDMONTON SUN: FRIDAY, JUNE 16, 2017
It’s all about money.
It always is.
An entrepreneur full of dreams wants to create a better mousetrap that’ll take the world by storm and make him or her a gazillionaire.
But they can’t find the money — the thousands, the hundreds of thousands of dollars — it takes to get a company up and running before the better mousetrap starts selling.
The aboriginal community is no different – except it may be even more daunting for a young community member to launch a business.
Which is why a lot of local pride will be on display next Wednesday and Thursday at the Shaw Conference Centre.
The Alberta Indian Investment Corporation (AIIC) is hosting a gathering of the 52 aboriginal financial institutions belonging to the cross-Canada National Aboriginal Capital Corporation Association. The occasion happens to fall, not un-coincidentally, on Canada’s June 21 Aboriginal Day.
The AIIC has been among the most successful of those lending institutions, providing capital to Alberta’s aboriginal entrepreneurs when nobody else would, AND being prudent enough lenders to ensure the loans are repaid with interest.
The AIIC, headquartered on the Enoch First Nation, was set up some 30 years ago with seed capital from the federal government.
Despite being a high-risk lender, the AIIC’s net assets have grown from $11 million to $22 million. Since conception, the AIIC has made about $60 million worth of loans to 800 businesses.
“Would-be aboriginal entrepreneurs still don’t find much interest from professional lenders,” says AIIC CEO Rocky Sinclair.
“They have a lack of credit history, no equity, very little track record and next-to-no collateral. But they’re hard-working, they see an opportunity and they have the character to succeed.
“The AIIC is like any other lender – we have to be careful and prudent in picking our clients. If we make a mistake, that capital doesn’t flow back for re-investment.
“But our mandate allows us to cut our clients a little slack. If we think a client is of good character, is a community-based person capable of providing both leadership and employment, we can accept less equity.”
Both Sinclair and long-time AIIC board member Bill Kordyback credit AIIC founding chairperson Fred Gladstone with creating an AIIC lending climate that was fair and objective and has endured to this day.
“Fred kept politics out of the decision-making process,” says Kordyback. “He made sure AIIC bylaws forbid the board from lending to its own directors. He believed in lending to community role models, who could create success stories for others to follow.
“If a borrower was in financial trouble, Fred would travel to meet with the individual, take a real good look at the situation, and make recommendations to the board based on his own observations.”
As an “entry-level developmental lender,” the AIIC also offers clients and would-be clients financial education opportunities, not to mention sponsoring extra-curricular business clubs in high schools with high aboriginal populations.
An AIIC loan is not a long-term thing. “Our interest rates are a little higher than other lenders to weigh out the risk factor,” says Sinclair, “but we’re more flexible than most.
“Once a business is established, our job is done. We expect the owner will look for more favourable lending terms from other lenders once they qualify. When our loan is repaid, we then have more money to lend to other start-up entrepreneurs.”
Most AIIC clients are in rural areas. Their businesses are in resource extraction, construction, trucking and retail.
But that’s changing, says Rocky. “We’re seeing younger urban aboriginal entrepreneurs apply for loans. They are becoming more sophisticated, better educated, bringing us business proposals we didn’t see before, like food trucks.”
The AIIC is a minnow among fish when compared to Alberta’s main lenders, such as ATB Financial, the Canadian Western Bank, Servus Credit Union and others.
Its loans are small – on average about $90,000, with a maximum of $500,000.
But on an individual and community improvement basis, the AIIC competes with the best. And the money is made available at critical times. The Fort McKay First Nation outside Fort McMurray is well known for its many established businesses serving the oilsands. Many of those companies were started thanks to AIIC loans.
Across the country, aboriginal financial institutions have done well, both in becoming self-sustaining and in serving their aboriginal communities. The umbrella National Aboriginal Capital Corporation Association says 4,432 jobs were created last year within the native community from $108 million lent out to 1,344 clients.
It’s all quite impressive – appearing to truly encourage economic self-sufficiency in First Nations rural and urban communities.
The AIIC’s success is a reminder that for every negative story you hear about Alberta’s indigenous peoples, there are many more positive stories.
We just don’t hear about them.