Progress Fund marks 20 years of assisting small businesses

In 2012, Clyde McClellan was facing the prospect of having to refuse the offer of a lifetime.

Starbucks Corp. was knocking on his door, asking for an order of 20,000 coffee mugs for its “Indivisible” line. But his small company, American Mug & Stein in East Liverpool, Ohio, was struggling and hadn't received a line of credit in three years.

A debt-consolidation loan from the Greensburg-based Progress Fund was the shot in the arm he needed — one that continues to echo five years later.

“It kept me in business,” McClellan said of the financial assistance.

The Progress Fund's initial loan of $125,000 gave American Mug the cash it needed to fulfill the order and keep Starbucks as a customer. Another $40,000 went toward roof repairs.

“That relationship (with Starbucks) has led to every single bit of new business we've gotten over the last five years,” McClellan said.

For 20 years, the Progress Fund has been the missing link for businesses, such as American Mug, that can't get the attention of traditional banks. The nonprofit organization recently closed on its 500th loan and has helped more than 300 small businesses with loans exceeding $65.8 million.

Local beneficiaries include Rabbit Hole Records in downtown Greensburg, which received a business startup loan, and the Eastwood Inn in Ligonier Township, which changed ownership after a business purchase loan.

Eastwood Inn co-owner Drue Spallholz said he went to two banks before learning about the Progress Fund from the St. Vincent College Small Business Development Center.

He and his wife, Erica Nuckles, received a loan of $310,000 toward their purchase of the inn in July 2015. The couple had moved to the area so that Nuckles could take a job with Fort Ligonier.

“The Progress Fund looked holistically at the deal instead of just on paper,” Spallholz said. “I felt very supported by them. They seemed interested in my success.”

The fund's track record of 3,786 jobs created or retained has caused it to look outside Greensburg and consider opening an office in Pittsburgh. “We see a lot of desire for the type of lending we do, in the city,” said co-founder and CEO David Kahley.

The Progress Fund started in 1997 to facilitate tourism and economic development in underserved communities in Western Pennsylvania, Eastern Ohio, Western Maryland and West Virginia's Northern Panhandle. It was certified as a Community Development Financial Institution (CDFI) the following year.

With an office of six staff members, the Progress Fund manages a portfolio of 33 different funders — state and federal agencies, foundations, commercial banks — and makes loans of $5,000 to $1 million to restaurants, small retail outlets, hospitality and tourism-related businesses, and manufacturers.

Although the CDFI industry is generally unregulated, the Progress Fund is audited annually and answers to its funders with a variety of reports and financial performance covenants, Kahley said.

“We often say we have 33 ‘regulators.' If we don't perform, the funders get their funds back,” he said. “If we meet the needs of the business, they are far more likely to succeed, and when they succeed, the Progress Fund gets paid back and the community gets the jobs we help to create.”

Kahley said CDFIs operate with different priorities, assumptions and goals than banks.

“We start with mission first. The first question we ask is not, ‘What's your credit score?' but, ‘What are you planning to do?' ” he said. “Banks look to make money off loans and to get paid back. We want to get paid back too, but we want the jobs, the buildings rehabbed. … We'll work with people that are maybe not bright-and-shiny to the bank.”

Approached by Starbucks in 2012, McClellan said he couldn't get a loan despite doing business with East Liverpool banks for 30 years. Starbucks, which wanted American-made mugs to bolster its Create Jobs for USA initiative, put McClellan in touch with the Opportunity Finance Network, a Philadelphia-based trade organization, which put him in touch with the Progress Fund.

Kahley went to East Liverpool and looked at the company's books. “They got back to me and said, ‘There's absolutely nothing wrong with your financials,' ” McClellan said. “They at least give you a decent hearing. They're aware of what small business's needs are.”

The deal that followed attracted the attention of The New York Times and other national media as a sign of hope in the American manufacturing sector. American Mug's workforce grew to 42 and has since settled at 16 to 20 workers, McClellan said.

The business, one of only two potteries left in East Liverpool, still makes hand-cast coffee mugs for the original Starbucks store at Seattle's Pike Place Market but also has diversified its customer base, he said.

The Progress Fund's loan to American Mug recently got the attention of Ohio Sen. Sherrod Brown, a Democrat whose Banking, Housing and Urban Affairs Committee held a hearing on CDFIs in March.

“CDFIs play an important role in rural and urban communities in Appalachia,” he said.

In a 2014 survey commissioned by the Progress Fund, 75 percent of borrowers said they would not have been able to proceed with their project without the financial support. Ninety-five percent said the loan helped them achieve their strategic business goals.

Fifty percent said that full-time employment had increased as a result of the Progress Fund loan, while 66 percent and 42 percent reported an increase in part-time and seasonal employment, respectively.

Stephen Huba is a Tribune-Review staff writer. Reach him at 724-850-1280, shuba@tribweb.com or via Twitter @shuba_trib.