A Maine-based investment fund that was designed to help small businesses in rural areas has gone into receivership after operating for 15 years as part of a failed experiment by the U.S. Small Business Administration.

A federal judge has turned over management of the fund, operated by Brunswick-based Coastal Enterprises Inc., to the SBA for the purpose of liquidating it.

The deeply indebted fund, known as CEI Community Ventures Fund LLC, is one of the last remnants of an SBA program launched in 2002 to infuse long-term capital into small businesses in underserved areas through equity investing.

While Community Ventures met its goal of creating rural jobs, it was ultimately hamstrung by factors including a recession in the early 2000s, restrictions on where it was allowed to invest, and a requirement that investment capital provided by the SBA must be repaid with interest, according to those involved.

“It was really a social experiment, so that made it very challenging,” said Tim Agnew, principal of Massachusetts-based Masthead Venture Partners, who did volunteer work for the fund.

Community Ventures was licensed by the SBA in August 2002 as a New Markets Venture Capital Company, according to a complaint filed in September by the SBA in U.S. District Court for the District of Maine. The fund’s purpose was to make equity investments in small businesses in rural New England.

An equity investment is essentially the purchase of a portion of the business. It usually yields a return on investment only when the business is sold or has a public offering of shares.

The New Markets Venture Capital program was entirely different from the Maine New Markets Capital Investment tax credit program, which offers tax breaks to spur investment and was the subject of a Press Herald investigation in 2015.

According to the complaint, the SBA provided $7.5 million of financing to Community Ventures, which was combined with other capital from private investors. The SBA loan was never repaid, it said.

In its complaint, the SBA indicated that the fund had lost more than 70 percent of its original value, thus violating the conditions of its license and prompting the SBA to take action against the fund.

According to SBA spokeswoman Carol Chastang, Community Ventures was not the only New Markets fund to run into problems.

Out of the six funds licensed under the New Markets program, three are in receivership and another one already has been liquidated, she said.

In all, the SBA provided $72 million of financing to the six funds, Chastang said. So far, only $16.4 million of that money has been repaid, she said.

The six funds made equity investments in a total of 71 businesses from 2002 to 2004, according to Chastang. About $54 million was invested, and the rest went toward paying operating costs.

CEI is a business development organization focused on creating jobs and boosting local economies in rural areas. It oversees a suite of organizations that include nonprofit and for-profit financing and investment groups.

It has had success with a number of its other investment funds.

It announced Monday that its most recent venture capital fund, Coastal Ventures IV Limited Partnership, has been certified by the U.S. Treasury as a Community Development Financial Institution, a sign of the federal government’s faith in the fund and its mission.

CEI spokeswoman Elizabeth Rogers said the now-troubled Community Ventures fund made equity investments in nine rural businesses. Seven of the businesses were sold or went out of business, Rogers said. She would not specify how many were sold and how many went out of business.

The two remaining businesses in which Community Ventures invested will not be affected by the fund’s liquidation, Rogers said.

“CEI worked in partnership with the SBA and other private investors to invest in companies that created hundreds of jobs, new technologies, and brought hope and income to rural areas in northern New England,” she said.

Agnew said the New Markets program that spawned Community Ventures was a noble effort to boost rural economies, and that CEI did everything within its power to make the fund succeed.

But venture capital funds can take years to produce a return on investment, he said, which is incompatible with short-term financial pressures such as having to repay a loan to the SBA.

“The point of venture capital is to be patient capital, but debt is not patient capital,” he said.

Chastang acknowledged that the six New Markets funds faced an uphill battle.

“Although six funds selected over a two-year timeframe are not adequate to judge program outcomes, (the funds) clearly faced hurdles that make it difficult for any venture fund, including the small fund size, high fee structure and geographically confined investments,” she said.

J. Craig Anderson can be contacted at 791-6390 or at:

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This story was updated at 10:45 a.m. on Oct. 17 to correct the number of businesses that received financing through the CEI venture captial program.