In the fall of 2010, a national distributor approached a small gourmet food processing business located in the rural Peoria Metro area with a large business opportunity. Great opportunity to have, right? Not if taking the contract means you need to double your packaging capacity—immediately. The food processor needed a loan to purchase packaging equipment, and working capital to hire additional employees. The EDC worked with the company and their bank to connect them with microloan financing to complement traditional bank financing, enabling them to expand and secure the new contract.
Small businesses throughout our region create most new jobs, drive innovation and provide a vital tax base to our communities. However, there is small business, really small business and microbusiness. According to the Small Business Administration, a small business has less than 500 employees. To most of us, that sounds pretty big. That’s because a greater percentage of businesses are much smaller. Roberta Parks of the Peoria Area Chamber of Commerce reports that approximately 75 percent of the Chamber’s membership consists of businesses that have 20 or fewer employees. Then, there are the microbusinesses with five or fewer employees.
Many of these small and microbusinesses do not qualify for traditional lending for a variety of reasons, including minimal collateral and cash flow accounting. Or perhaps the business is just a dream in the heart of an enterprising entrepreneur. The availability of microloans can launch a business, create jobs and change the local economic landscape.
Microloans help our communities prosper by helping entrepreneurs get their dreams off the ground, existing small businesses expand and grow, and small businesses experiencing tough times get over a rough patch and on to prosperity.
So, what is a microloan? It is a small, short-term loan, typically made to small businesses of all sizes. The amount can vary; however, it is usually less than $50,000. The business can use the money to purchase furniture, fixtures, equipment, machinery, inventory or for working capital.
Microloans target businesses for which traditional sources of capital may not be accessible. They enable viable business ideas to become new businesses and new employers, thus becoming an employment creation strategy. Innovative communities across the nation are using microloans to stimulate and create economic growth and development.
The funds for these loans are made available through the Small Business Administration, USDA Rural Development, Department of Housing and Urban Development, Economic Development Administration and more, for businesses that fulfill the various requirements that come with each program. The EDC is a great resource to get your business connected to the right loan program.
Dollars alone won’t equate to success. Most small businesses benefit from the expertise of our community partners. Bradley University’s Small Business Development Center, the Peoria Chapter of SCORE and the companies of The Heartland Partnership offer business educational programs, ongoing support and advice, along with one-on-one counseling to assist businesses with their financial administration.
“Microloans are another tool in our economic development tool box that keep our small businesses working and open for business,” says EDC President Vickie Clark. “Microloans empower hard-working people to create jobs and a stronger community.” iBi