The American Recovery and Reinvestment Act will funnel $50 million for loans and $24 million for technical assistance into the U.S. Small Business Administration’s Microloan program to increase access to capital for small businesses. The program is shifting to money from the ARRA after exhausting the $20 million in loans and $20 million in technical assistance designated for 2009. With the additional resources, SBA is focused on adding new lenders and encouraging entrepreneurs to seek out SBA-backed microlenders to finance their businesses. The program provides a critical source of capital for entrepreneurs, including women, low-income individuals and minorities, who often have difficulty obtaining capital to start and grow their businesses, SBA Administrator Karen Mills said. "With these resources, we can put more entrepreneurs and small-business owners in a position to succeed and create jobs that will in turn help drive our nation’s economic recovery,” Mills said. In Oklahoma, four lenders can provide microloans, and some are seeing an uptick in requests. At the Tulsa Economic Development Corp. in Tulsa, which serves Oklahoma County, program manager Tara Martin said there are more people looking for help. "In the past few weeks, we have seen an increase in requests for information about the microloan program,” Martin said. "We are exceptionally excited, because any opportunity we have to secure more resources for small business is worthy of celebration.” Stacie Pace, program director at microlender Little Dixie Community Action Agency in Hugo, said low credit scores and tightening at banks have made it harder to find funding. "This additional funding will give us the opportunity to help more small businesses,” Pace said. "We have seen an increase in the number of people who are coming to us looking for loans.”
Overcoming problemsBanks are sometimes reluctant to finance startups, and low credit scores can hurt an entrepreneur these days, she said. But Little Dixie is able to help small businesses rebuild credit by making small credit-building loans of $500 to $1,000 to finance or expand their business. "And then we work with them on their credit issues so they are able to qualify for loans in the future,” Pace said. The program is especially important to entrepreneurs looking for help with working capital and acquisition of materials, supplies and equipment. While the infusion of money is targeting small-business ventures, the new funding also could encourage more lenders to enter the program, said Darla Booker, public information officer at the SBA office in Oklahoma City. SBA also provides grant funding to microlenders to finance technical assistance and counseling programs for their borrowers, including staff, classroom training and occupancy costs. SBA’s reimbursement is capped at 25 percent of the microlender’s outstanding SBA loan portfolio. Organizations interested in becoming SBA microlenders must meet specific criteria in terms of organizational status, microlending experience and matching requirements from nonfederal sources. Booker said.
About the program
The Microloan Program provides very small loans to startup, newly established, or growing small-business ventures. Under the program, SBA makes funds available to nonprofit community based lenders, or intermediaries which make loans up to $35,000, with the average loan size at about $13,000. All credit decisions are made on the local level. Terms, interest rates and fees
The maximum term allowed for a microloan is six years. Loan terms vary according to the size of the loan, the planned use of funds, the requirements of the intermediary lender, and the needs of the small-business borrower. Interest rates vary, depending upon the intermediary lender and costs to the intermediary from the U.S. Treasury. Generally the rates are between 8 and 13 percent. Definitions
→Collateral: Business owners contemplating application for a microloan should be aware that intermediaries generally will require some type of collateral and the personal guarantee of the business owner. →Technical assistance: Each intermediary is required to provide business-based training and technical assistance to its microborrowers. Individuals and small businesses applying for microloan financing may be required to fulfill training and/or planning requirements before a loan application is considered.
Oklahoma Microloan centers
→Greenwood Community Development, Tulsa →Little Dixie Community Action, Hugo →Rural Enterprises of Oklahoma Inc., Durant →Tulsa Economic Development Corp., Tulsa SOURCE: Small Business Administration