As Mountain Bizworks continues to restructure its services, Buncombe commissioners are considering a plan to give the influential local business nonprofit $50,000 toward a new microloan program.
The Buncombe County funding would be used to leverage $300,000 from the federal Small Business Association Microloan Program. Mountain Bizworks would use the funds to make at least 25 microloans to small businesses in Buncombe County over the next year, according to its report.
The idea is for the nonprofit to funnel the money to low-income entrepreneurs who need relatively small sums of money they can’t get through traditional banks.
“We’re committed to supporting small businesses and this is a real way to do it,” says Buncombe County Board of Commissioners Vice Chair Ellen Frost, who helped put the plan together.
Interest rates will range from 7.5 to 11 percent. As borrowers repay the initial loans, proceeds will go back into the fund and be available for other loans.
“If it’s successful, it could be something we really expand in the next year or two, after we try it out on a smaller scale,” says Commissioner Brownie Newman, who also helped draft the plan. “If we make some initial investments, we think we can really expand what’s available.”
In recent years, the county has given millions of dollars in incentives to large international manufacturers like GE Aviation and Linamar to help lure them into expanding local operations and creating jobs.
“When some of the bigger manufacturing projects come in, we’ve really gone to bat for those … People often ask what’s the county doing for small businesses,” says Newman. “I think that’s a really good question, so we’re trying to put some ideas forward for what the county can really do to support and foster the small business sector in the community, which is really where the majority of jobs will be created in the future. We think that the county can really start doing more to support that really important part of our business community.”
In order to receive microloans, local entrepreneurs will have to meet a series of criteria developed by Mountain Bizworks to mitigate risks. The organization has loaned more than $7 million to small businesses since 2007, and has had a loan loss rate consistently under 2 percent, it reports.
However, Newman admits that there are risks with this type of investment.
“There’s risks to this. I don’t think you can ever fully eliminate that,” he says. “But I think the benefits to the community in terms of more small businesses, more jobs – I think in the big picture, this will be a financially good thing for the community, and ultimately that all comes back to the county in terms of tax revenues and things like that.”
Mountain Bizworks downsized this winter after suffering from a liquidity crisis. It cut more than have its staff and dropped a number of educational programs. The leaner organization is in the process of refocusing on business lending and states in its county request: “with the support of partners like Buncombe County, Mountain Bizworks can continue to meet its mission of creating economic opportunity by helping small businesses start, grow and create jobs through lending and learning for many years to come.” It also predicts that its administrative costs will decrease from 18 percent to 15 percent. Buncombe County guidelines recommend that nonprofits it partners with limit administrative costs to 12 percent.
The roster of successful enterprises Mountain BizWorks has helped fund or train over the years includes LaZoom Tours, The Organic Mechanic, FLS Energy and the French Broad Chocolate Lounge, among many others.
The board will meet at 4:30 p.m., Tuesday, April 1, in the commissioner’s chambers, located at 200 College Street, suite 326. A short pre-meeting review of the agenda will begin at 4:15 p.m.