Screen Shot 2015-03-05 at 11.41.50 PMThe State of North Dakota operates the only public bank owned by a state government in the U.S. Its mission is to deliver quality, sound financial services that promote agriculture, commerce and industry in North Dakota.  The Bank of North Dakota (BND) operates a series of lending programs, most as participation lending programs through local banks, to invest in North Dakota’s economy and to respond to other unmet credit needs in the state.  BND’s programs are organized into the following major categories:

  1. Farm/Ranch Financing Programs
  2. Business Financing Programs
  3. Government Guaranteed Loan Programs for Lenders
  4. Community Water Facility and Health Information Technology Funds
  5. Residential Real Estate Financing Program

BND also operates certain direct lending programs, including student loans, home loans, farm land acquisition and refinancing, and bank stock financing to address critical financing needs not met by traditional lenders.

North Dakota’s economy is quite different from Washington, DC, but some similarities exist.  This article profiles some BND commercial and small business participation lending programs through local banks that might be possible in a DC public bank.

Export Enhancement Program

The Export Enhancement Program is a financing tool for foreign buyers purchasing equipment from North Dakota manufacturers. Loans are made by Bank of North Dakota and are guaranteed by the Export-Import Bank of the United States (Ex-Im Bank) utilizing their medium-term credits program. Community financial institutions may participate in the loans.

Commercial Participation Lending

BND’s commercial lending programs include:

  • Business and industrial acquisitions
  • Construction, conversion, expansion, repair and modernization
  • Purchase of land, buildings and equipment and the repair and modernization of the equipment
  • Start-up and working capital
  • Refinancing an existing loan
  • Any other reasonable business purpose

Small Business Programs

  • The Business Development Loan Program assists new and existing businesses in obtaining loans that would have a higher degree of risk than would normally be acceptable to a lending institution.
  • PACE Program (Partnership in Assisting Community Expansion) assists North Dakota communities in expanding their economic base by providing for new job development. It has two major elements: (1) the participation by BND with a local lender in a community based loan, and (2) the participation by the PACE Fund with the local community in reducing the borrower’s overall interest rate.
  • The Flex Pace feature of the PACE program provides interest buy down to borrowers that do not fit into the traditional definition of a PACE qualifying business. Under Flex PACE, the community determines eligibility and accountability standards. Flex PACE allows communities the ability to provide assistance to borrowers with a business focus or need outside of the current requirements of PACE, such as jobs retention, technology creation with no new jobs, retail, smaller tourist businesses and essential community services.

Guarantee Programs for Businesses

  • The Beginning Entrepreneur Loan Guarantee Program helps businesses get started
  • The Export Enhancement Program is a financing tool for foreign buyers purchasing equipment from North Dakota manufacturers

Business Incentive Programs

BND takes a lead role in providing loan programs to encourage the creation of new wealth, expanded employment opportunity, farm income diversification. In addition to programs identified above, and in partnership with an originating lender, the MATCH Program supports the funding needs of a borrower whose financial capacity is very strong at very competitive interest rates.

Health Information Technology Fund (Direct Loans)

The Bank administers a $10 million Health Information Technology Planning Loan Fund to finance the following eligible projects:

  • Purchase, installation and/or support of software and hardware required to implement a fully functional, standards-based, interoperable electronic health records system.
  • Electronic medication history and electronic patient medical history information system.
  • Electronic personal health records for persons with chronic diseases and for prevention services.
  • Electronic prescribing.
  • Other electronic systems needed to meet meaningful use as defined in HIT’s program guidance review criteria section.

BND’s extensive set of lending programs shows the potential impact a mature public bank can make in supporting local lenders, small businesses, and communities. The small business lending programs of a new DC public bank would be less extensive at the  beginning, but could grow and adapt to serve the needs of small businesses in DC, and provide opportunity for new generations of entrepreneurs and small businesses.  Further information about each BND program, application requirements, and other details are available from BND’s website.