BILL PROPOSES MICROLENDING PROGRAM
BYLINE: Andrew Johnson, The Arizona Republic
Startup firms in the state could find another avenue for funding under a proposed bill that would establish a microlending program through the Arizona Department of Commerce.
Businesses with 100 or fewer workers could apply for loans of $35,000 or less. Details on how the program would be run and what requirements the applicants would have to meet still are being developed.
"It's a way that the state of Arizona can be involved in trying to assist a small businessman in emergency situations," said state Rep. Ben Miranda, D-Phoenix, author of House Bill 2173.
The proposal comes at a time when some microlenders in the state say they are struggling to meet demand.
"This particular year we're seeing more applications, and one of the challenges that we've had with federal funding (is) our funding has been shrinking," said Caroline Newsom, executive director of the Self-Employment Loan Fund, a Phoenix-based non-profit organization that lends to "microbusinesses" in amounts of $600 to $35,000.
The organization, commonly known as SELF, is one of four Arizona agencies that are certified to lend through the U.S. Small Business Administration's microlending program.
In 2006, the four organizations financed a combined total of $869,000 through the SBA's program, according to Bruce Hodgman, deputy director of the SBA's Arizona district office.
Definitions for what constitutes a microloan vary.
The SBA's microlending program defines a microloan as being $35,000 or less. For other agencies, the limit is $100,000.
Microloan applicants are often small enterprises that have just a few employees and typically do not qualify for traditional bank lending.
Nationally, microlending grew by 25 percent between 2004 and 2005, according to the most recent study on small and microbusiness lending from SBA's Office of Advocacy. That study defined a microloan as being $100,000 or less.
Miranda's bill would appropriate $5 million from the state general fund to the Department of Commerce for fiscal 2008. The program would expire in 2017.
Miranda said if approved, he anticipates that the department would establish its own criteria for lending "which would lessen the risk for the state in terms of a loss under this program."
Organizations such as the Microbusiness Advancement Center in Tucson, one of the four SBA microlenders, say a statewide program like the one being proposed could be beneficial because it would expand access to capital for the state's growing number of small businesses.
"There are plenty of people out there that need the loans and there are more people that are needing (money) than there are dollars available," said Debbie Chandler, executive director of the Microbusiness Advancement Center.
"Our fund is small. Our demand could easily surpass our supply," she added.
The Microbusiness Advancement's average loan size in 2006 was $6,700, Chandler said.
Chicanos Por La Causa Inc. in Phoenix also lends SBA-backed microloans through a subsidiary called Prestamos.
The organization supplements the SBA microloans with other funding sources, so its average loan size is $35,000, according to Chief Operating Officer Edmundo Hidalgo.
Many of the businesses are sole proprietors and are located across the state, he said.
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Microlending bill
State Rep. Ben Miranda, D-Phoenix, introduced House Bill 2173 last month. The bill would establish a microloan program through the state Department of Commerce. Under the program:
* Businesses with 100 or fewer employees could apply for loans of $35,000 or less.
* The bill would allocate $5 million to the Department of Commerce for fiscal year 2008.
* The program would expire in 2017.
Microlending agencies
Four agencies in Arizona do microlending through the U.S. Small Business Administration.
Prestamos (Chicanos Por La Causa Inc.)
* (602) 257-6777
Self-Employment Loan Fund Inc.
* (602) 340-8834
Microbusiness Advancement Center
* (520) 620-1241
advancementcenter.org
PPEP Microbusiness and Housing Development Corp. Inc.
* (520) 889-4302
* www.azsmallbusinessloans.com
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Reach the reporter at andrew.johnson@ arizonarepublic.com or (602) 444-8280.