Micro loans are a key to economic growth
By Tim Penny
Currently there is much talk about entrepreneurs. Minnesota State University, Mankato is creating a new entrepreneur center; Southeast Technical College is also developing an entrepreneur program; and Winona State University is sponsoring a series of speakers on this topic.
Here at Southern Minnesota Initiative Foundation (SMIF), we strongly believe small business entrepreneurs are the key to growing our communities in the 21st century. Studies show that 80 percent of all new jobs are created by small businesses. So growing small business entrepreneurs is a vital economic development strategy.
Since our inception in 1986, SMIF has been making investments to break new ground leading to economic growth and prosperity within our 20 county region. To date we have provided $19.5 million to support more than 350 businesses. Our financial assistance has helped provide employment for more than 6,500 workers.
One of the most powerful ways we are helping grow small business entrepreneurs is in our role as a micro enterprise lender. Under contract with the Small Business Administration (SBA) we distribute roughly $230,000 in loans annually within our region. We have found that micro loans, and the accompanying technical assistance, are critical ingredients that facilitate small business growth and success.
We are proud of our success within the micro loan arena. During the past seven years, we have provided $1.5 million in micro loans to 80 local small businesses along with more than 4,000 man-hours of technical assistance to hundreds of local entrepreneurs.
Our deficiency rate on our loans is only 11.5 percent, well below the allowable SBA rate of 15 percent deficiency rate. As our communities have become more diverse, we are seeking to provide additional resources to minority entrepreneurs, including more dollars for micro loans and technical assistance.
We have witnessed first hand the importance of these resources. For example, a local Somali couple wanted to purchase a grocery store. We were able to help with a micro loan and one-on-one technical assistance. Now they are ready to expand their grocery store by adding a restaurant. Without our micro loan pool and the important technical assistance, this couple’s dream of business ownership would not have happened.
Today we are forging new partnerships to leverage existing resources as well as exploring new avenues of funding. Some of our partners include the Latino Economic Development Center, Austin’s Welcome Center, Service Corps of Retired Executives (SCORE), and our region’s Small Business Development Centers. In addition, our classroom training for entrepreneurs is now expanding with plans to offer classes in Spanish and potentially Vietnamese or Sudanese.
Our vision for this region is that we will be a prosperous and growing region with vibrant communities, innovative and successful businesses, and a skilled and valued workforce. Our role in providing micro loans to entrepreneurs is one of the innovative ways we are achieving that vision.
Tim Penny, a former U.S. congressman, is president and CEO of the Southern Minnesota Initiative Foundation.