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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

/> "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 problems
Banks 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.

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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