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DeKalb small business owners and entrepreneurs turn to microlender as banks offer fewer loans
by Nigel Roberts
Small businesses—both established and start ups—struggled to get loans when the credit market crashed last year. With banks turning off or constricting their cash flow in the economic meltdown, many have turned to an increasingly popular alternative for cash: microlenders.
Microlenders are nonprofits that make loans that typically do not exceed $25,000 to small business owners and new entrepreneurs. Often, those seeking microloans have spotty credit, little experience or can’t find a bank willing to make a loan to their business.
“We’ve seen a significant increase in our number of applications, about a 300 percent increase, since last year when the credit crisis started. And we’ve also had a sharp increase in the number of inquiries,” said Charles Blackmon, executive director of the DeKalb Enterprise Business Corporation (DEBCO).
Microlending first captured the world’s attention in 2006 when Bangladeshi economist Muhammad Yunus won the Nobel Peace Prize for using microloans, through his Grameen Bank, to help eradicate poverty in developing counties.
But microlending institutions have been in existence in the United States since the 1960s. The U.S. Small Business Association (SBA) started its microloan program in 1992 to help small businesses get off the ground. It distributes small loans through a network of 170 “intermediaries” located in 46 states. According to the agency, it loaned more than $31 million to 2,650 borrowers in fiscal year 2008. Since its inception, more than 32,000 small businesses have received loans totaling in excess of $384 million.
With the steep economic decline, microlenders have seen a sharp rise in applications. Nationally, SBA intermediaries report that they’ve received applications from well-established small businesses with better than average credit scores that could easily obtain bank loans under normal economic conditions. But many banks are now requiring more collateral than in the past, and many business owners cannot obtain home equity loans as they did during the credit glut.
Blackmon noted that in addition to seeing an increase in the number of existing businesses that need a loan, he’s also witnessed a rise in the number of first-time entrepreneurs who are seeking income alternatives in a difficult job market.
DEBCO is one of five SBA intermediaries in Georgia. The nonprofit came into existence in 1999, making its first loan in 2000. According to Blackmon, it offers revolving loans that average $50,000 to businesses located in DeKalb County and microloans that average $15,000 to small businesses in DeKalb and surrounding counties (Gwinnett, Rockdale, Henry, Clayton and Cobb).
As nonprofits, microlenders have a community mission. Blackmon said one of DEBCO’s primary goals is expanding small businesses and thus creating job opportunities throughout communities it serves.
In its service to the community, some SBA intermediaries provide some level of business training for their clients. DEBCO often sends its clients to local colleges, such as Georgia Perimeter College for business training—which typically includes learning the fundamentals of running a business and creating a business plan. The organization also prioritizes its services to women and minority clients.
In the decade since DEBCO opened its doors, it has helped to launch a range of business ventures—from a bakery that started in its owner’s kitchen in Tucker to a venue that provides an elegant setting for parties and weddings in Lithonia.
In addition to funding from SBA, DEBCO also receives funds in the form of grants from DeKalb County, the United Way and commercial banks.
To find out more about DEBCO, visit its web site: www.Debco.org or call (404) 378-1899. The organization is located at 250 E. Ponce de Leon Avenue in Decatur.
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