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Microloans to offer help to small U.S. businesses

Debbie Blossom, Business Writer Modified: August 26, 2009 at 8:56 am •  Published: August 26, 2009
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.

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.

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

Community Development, Tulsa

Little Dixie

Community Action, Hugo

Rural Enterprises of Oklahoma Inc., Durant

Tulsa Economic Development Corp., Tulsa

SOURCE: Small Business Administration


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