Published in Finance

GROW could offer larger loans to small businesses under new federal program

BY Sunday, October 29, 2017 12:50pm

GRAND RAPIDS — A $125,000 federal grant provides the funding for Grand Rapids Opportunities for Women to gear up to become a larger lender to small businesses.

The funding will pay for GROW to “really take a deep dive into our current lending practices and policies and procedures,” and build the capacity to handle loans of up to $250,000, said CEO Bonnie Nawara.

That’s five times the lending cap GROW now has in place for a microlending program that in four years provided more than $1 million in loans to more than 40 small businesses.

The road to offering larger credits started in May 2016 when the U.S. Department of Treasury designated GROW as a Community Development Financial Institution, or CDFI. The designation, which is the only one in West Michigan, allows GROW to tap additional federal funding and offer larger loans to borrowers who otherwise may not qualify for traditional bank credit because they lack a track record or adequate collateral.

Primarily, GROW has provided training and coaching for entrepreneurs. Nawara describes the CDFI designation and initiative to offer larger loans as “enhancing” the nonprofit organization’s mission.

“It’s truly kind of changing the structure of our organization in that we’re going to focus on lending and continue to do the technical assistance that we’ve always done,” Nawara said. “It’s allowing us to grow in a different way. It’s allowing us to bring more capital to the table to support our small businesses.”

As the entrepreneurs GROW has supported and funded in the past mature, they require a larger amount of credit to run their businesses. That’s created a need for a larger lending program to support those clients’ growth trajectory beyond their startup phase and into their second stage of business, said Liz Ziesmer, president of GROW’s board and a principal at the Grand Rapids office of Rehmann.

Earning designation as a CDFI “makes a lot of sense because of GROW’s vision and expectation” to support entrepreneurs, particularly at a time when the Grand Rapids area is enjoying strong economic growth, Ziesmer said.

“It’s a proven, successful benefit and GROW’s been around a while, so we need to continue to elevate ourselves,” she said. “The organization is more mature now and we need to grow with our companies.”

Using the $125,000 Treasury Department technical-assistance grant, GROW will go through an internal review process of lending practices and hire a staff person to run the program, then apply for the federal funding to support lending in 2018. GROW should have an answer in about a year, Nawara said.

Even with the Treasury Department grant that was awarded in September, there’s no assurance GROW will get further federal money for loans, she said.

Early next year, GROW will begin approaching potential lending partners such as banks and local credit unions to inject money into the lending program, according to Nawara. GROW could “easily” deploy $2.1 million from a loan fund, she said.

In mid-September, the Department of Treasury awarded $208.7 million in technical assistance grants to organizations nationwide, including GROW, and provided loan funding to 303 CDFIs. CDFI loans are directed toward distressed or low-income communities.

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