Anyone with a good business idea – rejoice. A new Micro-Enterprise Loan program has been introduced in Tennessee to provide low-interest loans from $500-$5,000 to small-business entrepreneurs in rural communities. The program was formed in late 2006 by the Tennessee Department of Economic and Community Development (ECD) through its Business Enterprise Resource Office (BERO). An ECD-BERO startup fund of $125,000 was secured through a federal USDA Rural Business Enterprise Grant.
“The goal of our program is to create new businesses and new jobs in rural areas, with entrepreneurs able to use the loan money for working capital or to buy equipment,” says Michelle Proctor, BERO director. “The people who qualify for such a loan must live in a rural area and must also set up their business in a rural area. In addition, the business they form can only have up to five employees, including the owner.”
The loans can be repaid in as many as seven years, with interest ranging from 9 to 11 percent. “Most interest payments in micro-enterprise loan programs across the United States average 12 to 16 percent, because people in startup businesses in rural areas are considered high-risk,” Proctor says. “But we give people a chance, plus each applicant is provided with free technical assistance and business advice for the lifetime of the loan. BERO experts will help fledgling business owners with subjects such as setting up a business plan, cash flow management and marketing training.”
Proctor says the program’s first micro loan was issued in April 2007 to a home-based caterer in Franklin County. “The woman has a full-time job completely outside of food services, but she has been doing small catering jobs for the last 10 years,” she says. “She wanted to grow her business, so she got a loan of $4,000 to buy commercial kitchen equipment and also for some marketing funds. It’s too early to say if she’s made a success of things, but we [BERO] are going to help her every way that we can.”
Proctor says BERO will heavily weigh a micro loan applicant’s background within the industry they are pursuing. “For example, if someone has been a mechanic for 10 years, that is obviously beneficial if they want to go out on their own,” Proctor says. “As a result, we would loan this person money to buy tools or machinery or whatever else he needs to start his business in a rural area.” By the way, a rural area is defined by the USDA as a non-urbanized region with 50,000 people or less and is not located adjacent to an urban area. “We are going to the most remote areas of the state, and the word is just starting to get out on this program,” Proctor says. “We fully expect to allocate 25 to 30 loans over the first three years, and will then make more loans as these are repaid.”