EDITOR S NOTE: Last year s stimulus bill aimed to pump $275 billion into the economy through grants and loans and more often than not, small local agencies and nonprofits are making the call about where that funding goes. In this special report, Who s Guarding the Stimulus Stash? SmartMoney looks at the mom-and-pop operators who are handing out and spending the money.

Visit the Staunton Creative Community Fund, the storefront micro-lending outfit serving this charmingly preserved farm town, and the first thing you'll notice is the life-size mannequin manning the reception desk. It's a fittingly eccentric introduction to the loan committee gathered around the plastic conference table upstairs. There's Erin Blanton, a toy-store owner who enjoys knitting, volunteering and "watching crappy TV" in her spare time. To her right sits Meghan Williamson, 26, a former D.C. think-tanker who quotes Milton Friedman, wears her hair in waist-length curls and enjoys wielding a chain saw-she's clearing a hill outside town to make way for the house she's designing. Completing the threesome is Hugh Westfall, who does most of the talking. Retired from the feed-supply business, he likes organizing classical music festivals and reading about China. He's lived in Staunton for 29 years, and it shows.

As the committee combs through a $30,000 loan application from an ambulance repair service, Westfall displays an encyclopedic knowledge of all things Staunton. He offers a history of the applicant's facilities and his opinion of the town's last fire chief. Never breaking from his gentle cadence (he says "oh dear" every time he yawns), he delves into the rescue squad's staffing situation and analyzes Staunton's foreclosure market. Williamson, the fund's director, records a long list of issues to address before the loan is approved. Blanton, who's been eyeing the financials with a furrowed brow, pipes up with a list of minor bookkeeping discrepancies.

The committee can afford to be thorough. After all, there are only six applications in the pipeline, a situation Westfall ascribes to administrative holdups and the townspeople's cautious nature: "They're reluctant to jump in during a hard time," he says. But if history's any indication, just about every loan the committee reviews will be approved. Since the fund launched two years ago with a small grant from the town (the $250,000 stimulus windfall nearly doubled the loan pool), the committee approved all seven of the applications it considered. That's because the fund's paid staff of two typically devotes months to helping start-ups prepare an application-walking them through basics like developing a business plan. By the time the application gets to the committee, Westfall says, it's ready for approval: "It's a self-selecting process."

If anything discourages applicants, it might be the fund's stringent requirements. Most microlenders focus on job creation through self-employment. Staunton's fund is concerned with what's good for Staunton, and the committee has strong opinions about what that means. The start-up must be environmentally sound, improve the town's quality of life and add to its economic vitality. The applicant also has to demonstrate "good character," a standard recalling a bygone era when Staunton retailers ran their own private credit bureau. "We'd give personal recommendations," Westfall recalls fondly. "The numbers don't tell the whole story."

That afternoon Westfall and Williamson visit their pet project, George Bowers Grocery ("Staple Goods & Fancy Groceries")-a start-up that embodies the fund's mission. The store's idealistic owners fixed up a vacant storefront and buy provisions from local farms. But the quirky shop, designed to resemble an 1880s general store, has struggled. Launched with a Staunton microloan in 2008, it's back for more. Co-owner Brian Wiedemann says sales should improve now that he's refined the product assortment. He gestures at shelves displaying Amish Vidalia onion cheese, Indian dinner kits and local vinegar produced with solar power. "We just need more of it," he says. The store is a work in progress, Westfall says later, and so is the fund. He'll know the system's really working when there's finally a place downtown to buy affordable men's underwear. "That's a requirement for me," he says. "And you still can't do that here."

See Also:

Stimulus Gatekeepers: A Small-Town Troika
Stimulus Gatekeepers: Who They Really Are
The Stimulus Bill: How to Cash In