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Thursday, 01 August 2013 12:24

GROW seeks commitments to add permanence to microloan program

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After tripling the available funding for microloans that support small business owners, Grand Rapids Opportunities for Women (GROW) now wants to partner with local banks to sustain the initiative well into the future.

Three banks — Comerica, Mercantile Bank and Fifth Third Bank — have already made financial or in-kind commitments to the microloan program run by GROW that has provided more than $238,000 in credit to nearly 20 new small businesses.

The involvement of banks that offer both money to supplement the lending pool, plus support such as mentorship or coaching for small business owners, can build sustainability and permanence into the microloan program, said Bill Hahn, GROW’s microloan program manager.

“The microloan program has such great potential to just become a permanent program,” said Hahn, who hopes to recruit “a good blend of bankers into the mix.”

“We want to really build a sense of community around the program within the financial industry,” he said. “From a collaboration standpoint, you’re always going to get more done and you’re going to have a higher rate of success with anything than if you go it alone.”

GROW entered the micro-lending arena in 2011 through a pilot program funded with a $50,000 anonymous donation. The pilot’s success enabled GROW to secure $200,000 from the U.S. Small Business Administration in 2012 for a revolving loan fund.

The organization recently secured another $600,000 from the SBA.

GROW uses the SBA funding to provide loans of up to $50,000 to small business owners in Kent, Ottawa, Muskegon, Newaygo, Montcalm, Ionia, Barry, Allegan and Kalamazoo counties. Entrepreneurs can use the fixed-rate loans to buy equipment, machinery, furniture, fixtures and materials and for operating capital. They must repay the loan within six years.

Since the original pilot project, GROW has approved 24 loans for 19 small businesses totaling $238,716. All of the companies are still in business and collectively created 39 jobs within 90 days of receiving a loan. Hahn estimates that those businesses now employ more than 70 people combined.

The new funding from the SBA “will be a good shot in the arm to keep our momentum going,” Hahn said.

Beyond securing the additional $600,000 from the SBA, GROW landed a $25,000 commitment from Comerica Bank for small business lending.

The Comerica funding, and any additional capital from other banks, will allow GROW to expand the use of microloans. The SBA prefers that microloans not go for small business owners to lease or buy real estate, Hahn said.

“A separate loan pool would allow us to help them,” he said.

Fifth Third Bank committed $10,000 to support the microloan program’s loan-loss reserve, as well as staff who serve on a loan committee and advisory council. Mercantile Bank supports the initiative with a member on the advisory council.

Hahn hopes to partner with as many as eight banks within a year, and eventually up to a dozen, whether through a financial commitment or the participation of staff. In-kind support can prove just as valuable as a financial commitment, he said.

Having bankers, for example, provide mentorship, business coaching or a periodic business “wellness check” for borrowers improves the chance their business will succeed. It also reduces the risk for the microloan program.

“It can help businesses succeed and thrive,” Hahn said. “You’re always better with five brains than one.”

Ultimately, Hahn hopes to see additional microloan programs in other communities across the West Michigan market, either through a partnership with GROW or via other organizations, to support small business owners as they start out.

“I’d love to see a larger microloan community in West Michigan,” he said. “We want to see West Michigan with a very robust program.”

Read 2883 times Last modified on Thursday, 01 August 2013 13:19

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