A division of the Indianapolis Chamber is applying to become a U.S. Small Business Administration-affiliated microlender, a move aimed at boosting its available capital and expanding its territory in a wide-open frontier of finance.
The 124-year-old chamber already offers microloans through its Business Ownership Initiative, putting it in rare company among its peers across the country and giving it a leading position as a one-stop shop for small businesses. But that’s not enough. BOI is looking to beef up its role as a microlender as demand for these mostly low-five-figure loans continues to grow.
The BOI Microloan Program has a roughly $2 million fund to make these loans, but nearly half of that already has been deployed. And because of its diverse history, much of the program’s funds are restricted to Marion County, even specific neighborhoods within the county.
Becoming an SBA intermediary would pave the way for BOI to receive an initial infusion of about $750,000 from the SBA and would allow the program to expand to eight surrounding counties. The program over time could receive as much as $5 million from the SBA—money that BOI would have to repay.
Microloans are loans of less than $50,000 that some businesses struggle to obtain from traditional financial institutions. Such low amounts often aren’t worth the bank’s or credit union’s while, and sometimes collateral or credit scores pose a problem for small-business owners.
BOI was an independent microlender before it merged into the chamber in 2012. It started out with about $150,000 in capital, officials said, but got grants from the city of Indianapolis and JP Morgan Chase’s charitable arm to grow the fund.
Ian Scott of the Association of Chambers of Commerce Executives said several chambers across the country are involved in connecting small businesses with financing, but Indy Chamber’s latest venture puts it in rare company.
“This is an innovative program that is certainly on the cutting edge of what chambers are doing to support small- and medium-sized businesses,” Scott said.
As an intermediary, BOI would not be able to use SBA money for operations, officials said, and all interest income on SBA funds is returned to the SBA. Julie Grice, who oversees BOI as the chamber’s vice president of entrepreneur services, said the $1.2 million annual operating budget is supported by grants, service fees and interest income from its other microloan funds.
The loans made by BOI so far have been as small as a few thousand dollars and have allowed businesses like Kountry Kitchen at 19th Street and College Avenue to make unexpected repairs.
The smaller the loan, the more personal the collateral, Grice said. One loan has been secured by three guitars, she said. Another involved a lawnmower.
The region has a few other non-SBA microlenders, including Indianapolis-based Lynx Capital Corp., which focuses on minority businesses, and Grameen America, a Bangladesh-based lender that opened an Indianapolis office in 2012. The Boone County Economic Development Corp. and the town of Zionsville also have microlending initiatives.
Flagship is the Big Kahuna with respect to SBA microloans in the state, but that might change if BOI joins the fray. Adam Hoeksema, Flagship’s loan program manager, said he doesn’t see BOI’s entry as a bad thing, and the two organizations already send referrals to each other.
