Banking & Finance and Small Business & Startups

GROW microloan program grows threefold

July 12, 2013
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Grand Rapids Opportunities for Women will triple its microloan program from $200,000 in Small Business Administration funds it had available last year to $600,000 going into this year.

GROW has two years to lend out the funds, but William Hahn, GROW microloan program manager, said he expects to make all the loans this fiscal year because of the program’s popularity and growing visibility.

“With the additional funds, it’s obviously going to increase our lending capacity,” he said.

Of the $200,000 made available last year, GROW extended $189,121 worth of credit to 14 businesses and 17 loans were funded. Hahn said if lending continues at the same clip this year, he estimates helping three times the number of businesses.

The additional funding is particularly important to women business owners and entrepreneurs in the Grand Rapids community. Of the businesses that received loans during 2012, 92 percent were woman owned, 15 percent were minority owned, 23 percent were owned by single mothers, and 50 percent of the business owners had a household income that was less than HUD’s Low Income guidelines.

In addition, 38 jobs have been created as a result of the loans.

Hahn explained the GROW microloan program is specifically for borrowers who do not qualify for traditional loans. He pointed out that women borrowers, in general, are at a disadvantage when it comes to lending.

“Despite owning nearly 30 percent of U.S. businesses, women attract only 5 percent of the nation's equity capital,” he said. “When it comes to first-year funding, women receive 80 percent less capital than men.”

Yet, women-owned businesses are the fastest-growing segment of new business in the economy. GROW’s microloan program seeks to help women-owned businesses overcome the obstacle of inequality that persists in the area of lending by providing loans to low-risk women business owners who cannot get traditional loans.

“One of the best examples is a business owner who just through circumstances of life — a single mother — approached a bank and wasn’t able to get the funding she needed to add a second vehicle to her operations, which would increase her revenue by about 75 percent and create two additional jobs.

“She’d already saved a substantial amount of money that she wanted to use to buy this vehicle, but just needed the loan to retrofit it, as well. But because she was a single mother, pretty much every last dime that her business generated in profits funneled directly over to her to pay her household expenses. From a traditional banking standpoint, her business would not have shown the cash flow so she wasn’t able to get the loan.”

Because the woman was considered a low-risk borrower and could not qualify for a traditional bank loan, she qualified for the microloan from GROW.

The GROW microloans may be used for the purchase of furniture, fixtures, supplies, materials, equipment and/ or for working capital. They have been used nearly equally by business startups and those looking to expand an existing business.

The microloan program is quickly becoming one of GROW’s most powerful resources in achieving its mission of providing education, connections and resources that create and strengthen women-owned businesses.

Hahn cautions that despite the program’s success, it is not altering the primary goals and focus of GROW. “The microloan program is not about lending money. It is about giving entrepreneurs the help and support they need to operate successful businesses.”

Bonnie Nawara, CEO of GROW, added: “What the microloan program does for GROW and our community is just another resource to help entrepreneurs grow their businesses. We haven’t had a microloan program in our community since the early 2000s, so this is a great asset.”

Nawara and Hahn emphasized the importance of GROW’s educational and training programs and pointed out that many of the borrowers are involved with GROW in these other capacities, which also improves their chances for receiving the loan because they’ve shown they have the ability to sustain a business and are considered lower risk.

“In spite of the excitement around becoming a lender and the enormous undertaking it has been and will continue to be, at its core the microloan program is really a very clear indicator of how committed GROW is to the small business community,” Hahn said. “GROW has accepted a substantial amount of debt to lend to small businesses that do not fit into the traditional lending models. This will offer them the opportunity for expansion, additional revenue, and ultimately increased household income. Furthermore, this will result in job creation and increased economic development.”

Nawara added: “One of the big reasons that we were chosen by the SBA to be an intermediary lender is the fact that our core premise is providing what in the industry is called technical assistance, and that is training and guidance for our businesses — that is the true core of what it’s all about.

“We can loan people money to start their businesses and grow their businesses, but as you start and grow your business you also need to develop and refine your skill sets, and that is what we are here for. We really encourage our micro-lenders to become involved in some of our technical assistance aspects.”

The microloan program is not limited to women-owned businesses.

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