News Column

CANI now taps deeper pool of financing for business microloans

June 25, 2014

By BOB CAYLOR, The News-Sentinel (Fort Wayne, Ind.)



June 25--A Fort Wayne nonprofit that helps fund fledgling businesses now has a deeper well of resources to draw on for these "microloans."

Community Action of Northeast Indiana announced Tuesday that it is now a federal Small Business Administration intermediary microlender. What that means for people looking for loans is simple: Much more money is available.

Steve Hoffman, CANI's president and chief executive officer, said Tuesday that the SBA will provide $250,000 a year for each of the next three years. That dwarfs the lending by CANI's Center for Community and Economic Development since it was established in 2010. CANI has loaned $130,888.96 to 28 businesses for an average of $4,674.61 per loan since 2010, the nonprofit said in its announcement.

CANI can lend as little as $300 and as much as $50,000, depending on a prospective borrower's credit, income and operating history. But these loans are not mortgages. Their terms are relatively brief, with higher interest rates than anyone associates with homebuying.

Interest rates vary between 6.75-9.25 percent, according to CANI. Their maximum term is 60 months.

A crucial part of attaining its status with the SBA was CANI's work with Fifth Third Bank, which provided $20,000 for loan loss reserves for the SBA microloans to maintain CANI's loan pool in case of loss.

At first glance, that might seem like a peculiar partnership; after all, CANI appears to be competing for loan business with Fifth Third. In reality, Hoffman said, the role of the microlender is to provide opportunities for borrowers who can't meet commercial standards for loans.

"We're after people who cannot get traditional loans," Hoffman said.

That's not to say they're bad risks. Some may be after loans that are too small for most commercial loan departments, Hoffman said. Others have lower credit scores than banks look for in customers.

"We'll take more risks than a traditional bank," he said, while also being careful with money CANI lends.

Hoffman said working with the SBA also brings the local group more access to technical assistance, such as providing workshops and instruction in financial literacy and writing business plans.

There's no one sort of business that qualifies for loans. Hoffman said food vendors, clothing stores and auto mechanics have been among CANI's loan recipients in the past.

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(c)2014 The News-Sentinel (Fort Wayne, Ind.)

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Source: News-Sentinel (Fort Wayne, IN)


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