NFIB

A Little Bit Goes a Long Way
10/ 01/ 2002

by Shannon Scully

If you don't have enough cash, collateral or experience to qualify for conventional bank loans, a microloan--ranging from a few hundred to a few thousand dollars-- might be a good option.

"We're just not the kind of business banks come chasing to give money to," says Paul Westrick, owner of Circle Journey, http://www.circlejourney.com , a Columbus, Ohio-based company selling keepsake correspondence kits. "Our business is unconventional. Here we were, two-and-a-half years ago, trying to start a business built on letter writing during the middle of the dotcom rage. No bank would even look at us."

So Westrick applied for a microloan from Community Capital Development Corp (CCDC). Like other microloan programs across the country, the CCDC acts as a nonprofit intermediary, receiving funds from the Small Business Administration, then doling them out to local businesses that qualify.

Our goal is to help the borrowers grow their business so that they can qualify for a conventional loan," says Brad Shimp, executive director of the CCDC, found online at http://www.ccdcorp.org "After they have established a good repayment history with us, banks are more likely to look at them."

Unlike a conventional loan, the SBA requires intermediaries to provide business training and support programs to its microloan borrowers.

Teresa Tullio, owner of Seattle-based Wild Child Art Studio and The PaintBox Company, credits much of the success of her custom-paint businesses to the peer-lending group she joined after receiving a microloan from intermediary Washington Cash four years ago. Tullio met weekly with six other members to discuss progress and brainstorm business ideas. The group even collectively decided which members should receive microloans, making them accountable to each other.

"I'd have an idea for my business that I thought was great, but when I took it the group, they raised issues I had not considered yet," says Tullio, who borrowed about $10,000.

Microloan programs usually loan money in stages, depending on the borrower's successful completion of certain hurdles. In Westrick's case, he had to wait six months between each of his three loan installments, so that his lender could see that Westrick's business idea was working.

Peter Rose, founder and executive director of Washington Cash, www.washingtoncash.org, says that the small loans are good starting points for those in the early stages of business.

"People wonder what kind of business you can start with such little money. But it does work," says Rose. "A lot of small business owners can get in over their heads in the beginning. They take on too much debt by getting a big loan, and then they can't afford their monthly loan payments. Most people don't realize that it usually takes a few years for a business to become profitable."

To learn more about microloans or to find an intermediary lender in your area, go to www.sba.gov/financing/frmicro.html

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Sourcebox Tools & Tips here on NFIB.com on has workshops and advice on cash flow and raising capital.

www.eDebtNetwork.com -- a Web-based referral search engine that helps creditors find debt professionals to help in collections.

Cash Rules, by Bill McGuinness and Raising Capital, by Andrew Sherman (both Kiplinger Books).

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This article originally appeared in the September/October 2001 issue of MyBusiness Magazine, NFIB's member magazine.

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