The federal Small Business Administration (SBA) is extending microloans to more Wisconsin businesses by bringing on two new locally based lenders to help entrepreneurs get their ideas off the ground.
Wisconsin now has nine agencies that can grant loans of up to $50,000 to new businesses. Spooner's Northwest Regional Planning Commission and the statewide Lincoln Opportunity Fund have joined others, such as local chambers of commerce, in the microloan program.
Eric Ness, the SBA’s Wisconsin District director, said the microloan program has grown in recent years. In 2011, it made 60 loans for a total of $1.4 million. Last year it totaled 119 loans at $2.8 million.
“The business where I take my dogs to get them washed, where I can get them a bath — they got an SBA microloan,” said Ness. “I talked to the entrepreneur and she said, ‘You know, I knew what I wanted to do, it was a dog grooming and bath service for dogs.’ But she said, ‘I needed some help in some of the accounting and setting up the business.’”
Local lenders provide that teaching and mentoring for free. However, Ness said, the SBA microloans come at a higher-than-prime rate, generally at 7.5 to 8 percent, because of the risk.
“It sometimes can get lonely as an entrepreneur,” said Ness. “Having that partner or somebody in your court to kind of help you run by questions is so important.”
Part of the reason the microloans cost more than prime is to pay for a “loan-loss fund.” That money is used if and when some of the start-ups fail, in order to keep the overall program financially viable.