Murfreesboro officials announced Thursday they are starting a microloan program. The city will make small loans to aspiring entrepreneurs. The idea is to create jobs through small businesses who don’t otherwise qualify for a line of credit.
On the low end, these loans could be as small as $5,000, according to MTSU professor Patrick Geho. That’s an amount too low for most business loans.
“But for this microenterprise loan injection, their dream would not happen.”
On paper, the applicants will also be high credit risks. Geho says they still must have the skill set and character to receive the loan, but maybe not the collateral.
“Their problem is they are credit or collateral-weak, so conventionally, a bank cannot make a performing loan to these individuals.”
Ultimately, Geho says the microloans offered by the city could be used them as collateral for a conventional business loan from a bank.
MTSU’s business center will sort through the loan applications and decide who gets the money. Preference will be given to proposals that create new jobs.
The $150,000 loan fund will come out of flexible grants from the Department of Housing and Urban Development.
The first orientation will be held at Murfreesboro’s Linebaugh Public Library February 11th.
Murfreesboro isn’t alone in its microlending experiment. A similar program launched this week in Orange County, California. While the term “microlending” has recently been associated with business development in third-world countries, bringing the idea to the U.S. also isn’t exactly a novel concept. A non-profit based in Chicago called ACCION has made such loans since 1994.
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