Since its launch in 2012, the KC Regional Microloan program has awarded more than 140 loans to entrepreneurs in seven counties totaling $1.2 million. Seventy-five of those loans were awarded in Kansas City, Mo.
“The program has exceeded expectations,” Kansas City City Council member Scott Taylor said. “What I really like about it is it has reached traditional segments of society that have had a difficulty securing capital to start businesses.”
The idea to launch a microloan program stemmed from one of the city's Small Business Committee hearings in 2011, Taylor said. Business owner after business owner told the committee that securing capital for their business proved challenging.
“It was a major problem for a lot of companies because there used to be microloan options in Kansas City before the financial collapse in 2007 and 2008,” Taylor said. “All of those options went away (as a result).”
Not only did small businesses begin relying on payday loans, they also relied on credit cards to make payroll and purchase inventory, said Galen Gondolfi, chief communications officer for Justine Petersen, one of the nation's largest microlenders and administer of the KC Regional Microloan program.
“In the last 25 to 50 years we've seen community banks leave a lot of neighborhoods; we've seen the acquisition and merger of larger national banks acquiring community banks,” Gondolfi said. “The result of that is an absence of the brick and mortar bank branches. That first and foremost creates a gap for businesses who had a longstanding relationship with a bank or they actually knew somebody.”
Businesses no longer have the “George Bailey” to depend on for funding, Gondolfi said in reference to the movie, “It's a Wonderful Life.” The Baileys of the banking world, who worked diligently with business owners to secure loans for them, have now been replaced by ATMs, websites and 1-800 numbers, he said. That personal relationship has been lost.
“It's become more stringent (to secure a business loan) and hence, more credit cards have filled that gap,” Gondolfi said.
Microloans through the program range from $500 to $50,000 and interest rates range from eight to 12 percent. The program is made possible through a partnership between the city of Kansas City, Mo., Justine Petersen, the Small Business Administration, local banks and other entities.
“This program has been successful for the mere fact that so many entities have come together,” Gondolfi said. “I've never seen such commitment, passion and diligence in terms of our partners.”
“It (microloans) has injected much needed capital into our small business community,” said Kansas City City Council member Jermaine Reed,” allowing us to foster an environment in Kansas City of entrepreneurship and innovation. By making these smaller loans available to many businesses instead of having a large loan given to one business, we are able to reach not only a greater amount of businesses but reach a wider variety of businesses as well.”
Businesses that have benefitted from the program have included daycares, hair salons, roofing, plumbing, auto repair, landscaping and more. Three months ago, representatives from the program walked along Independence Avenue to spread the word. A few of those businesses have turned in applications, said Lisa Zimmerman, a Justine Petersen small-business counselor for Kansas City.
Dr. Pamela Taylor, owner of New Hope Counseling Center based in Kansas City, Mo., obtained a $20,000 microloan through the program and was able to add 18 employees and secure a contract with the Kansas City Public Schools, said Zimmerman.
“It (microloan) was not a big amount of money, but it did a huge amount of job creation,” Zimmerman said.
Another woman who obtained a microloan was able to expand her home-based plus-sized women's lingerie company and create a more stable household income.
“Every type of business is taking advantage of this in different parts of the city,” Taylor said, “and that's pretty exciting.”