MORGANTOWN, W.Va. -- Mike Hurley had a great opportunity: He could multiply sales and staff by converting his metal-stamping business from one that made brackets for the automotive industry into a top-tier supplier of satellite dishes to DirecTV.
He also had a problem: Highlands Diversified Services is headquartered in small-town Appalachia, a place where big banks readily lend money for houses, cars and refrigerators but shy away from business loans. Louisville, sure. But not London, Ky., population 8,000.
"There's a stigma in Appalachia that says, 'You're profoundly rural, you're profoundly uneducated and you're remote, and we're not going to spend the time to get in there and provide you the financing,'" said Ray Moncrief, who stepped in with a $6 million line of credit through a local community development fund, the Kentucky Highland Investment Corp.
Lenders like him, determined to improve the economy, one small business at a time, are about to get a big boost. On Friday, the Appalachian Regional Commission announced the formation of a new central bank to serve them, a go-to source of money called Appalachian Community Capital.
It's being held up as a model for other underdeveloped regions at the Clinton Global Initiative conference in Chicago, where ARC said it will invest $3.4 million to get the central bank off the ground. It's firming up commitments for another $39 million from philanthropic foundations, public investors and large commercial banks.
Over the next 24 months, ARC plans to leverage $233 million in private capital to create a projected 2,200 jobs in the 13 states the commission serves.
ARC is a state/federal economic development partnership created by Congress in 1965 to help build sustainable communities in a region beset by poverty and poor health. Its mission is to grow job opportunities and income, bringing Appalachia to parity with the rest of the nation.
ARC funds several hundred projects a year, ranging from tourism and telecommunications to highway construction and housing. The region itself stretches from Southern New York to Northeast Mississippi, and it's home to about 25 million people.
In 1965, one in three Appalachian residents lived in poverty. By 2008, the number had fallen to fewer than one in five. And while 223 counties were once labeled "economically distressed," ARC says that figure is now 98.
Challenges to competing in a global economy remain, though.
"We've recognized there is a chronic credit crunch in some of these distressed areas," said ARC federal co-chairman Earl Gohl. "This is a way to connect Wall Street with Appalachian Main Street. It gets access and capital into these communities."
The central bank also follows the region's formula for success, Gohl said. Communities with common needs collaborate to create their own solutions.
The 13 community development funds that make up the new central bank's board of directors understand "we can do things better together than we can individually," Gohl said.
Studies have shown that small businesses in Appalachia get loans at lower rates than the rest of the country -- 60 percent less in the most distressed counties. Also, ARC says less than 1.5 percent of professionally managed venture capital each year is invested in the region, which encompasses all of West Virginia and parts of 12 other states.