The Taunton-based nonprofit South Eastern Economic Development Corporation (SEED) recently started offering micro-loans to small businesses in Rhode Island as part of the U.S. Small Business Administration (SBA). The move follows a decision by the Rhode Island Coalition for Minority Investment (RICMI), the previous SBA micro-loan lender in the area, to suspend its program. Maria Gooch-Smith, SEED executive director, answered five questions about her organization’s expansion into Rhode Island.
PBN: Have you had a presence in Rhode Island before?
GOOCH-SMITH: Yes, in June 2004, SEED Corporation was given approval by the U.S. Small Business Administration to expand its area of operations into Rhode Island. This approval was given under SEED’s designation as a Certified Development Company (CDC) for SBA’s 504 Program, and included the entire state with the exception of Washington County.
As part of this designation, the SEED board of directors agreed to set up a fund to enable SEED to make small business loans up to $100,000 in Rhode Island. The board’s intent was to provide the same services and loans in all of SEED’s geographic territory, which now included Rhode Island.
Since 2004, SEED has made 17 loans totaling $5.9 million and assisted in the creation of 127 new jobs. SEED Ventures LP has made three investments in Rhode Island companies totaling $1.4 million. Twelve of the loans made by SEED were under the SBA 504 Program in conjunction with banks in the region, and five were small loans less than $100,000.
In December 2008, SEED closed with SBA on an initial loan for $500,000 to make SBA micro-loans in Rhode Island. SEED has been approved by SBA as an intermediary under the Micro Loan Program, enabling SEED to borrow up to $3 million for micro-loans. These are loans up to $35,000 to assist startup and existing small businesses.
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PBN: The expansion is in response to the freezing of new loans by the Rhode Island Coalition for Minority Investment. How did your involvement come about?
GOOCH-SMITH: SEED was approached by both the SBA and RICMI to make micro-loans in Rhode Island due to our nine years of successful experience making these loans. Selected RICMI borrowers were given the opportunity to have their loan restructured to a longer term and lower interest rate and be serviced by SEED.
SBA led the process within its regulations and requirements for its micro-loan program.
PBN: What other loan programs will you be offering and to whom?
GOOCH-SMITH: SEED will be offering all its loan programs in Rhode Island to small businesses eligible under SBA guidelines, which include most small businesses. The programs include the SBA 504 Program, SBA 7A Program packaging, Revolving Loan Fund Program and the Micro Loan Program. SEED Ventures LP will also continue to make mezzanine investments in Rhode Island companies.
PBN: Before the suspended loans, RICMI offered other programs and workshop for entrepreneurs. Will you be picking up that slack?
GOOCH-SMITH: Yes. SEED runs a monthly entrepreneurial workshop series and will conduct these workshops in Rhode Island. SEED will also be working with all SBA partners – such as the Small Business Development Center, SCORE [a volunteer organization offering small-business advice] and other economic development agencies – to coordinate efforts and fill in gaps as necessary.
PBN: In your experience in Rhode Island, what is the credit market climate right now? Are institutions lending to small businesses or are they holding back?
GOOCH-SMITH: Small businesses are having a very hard time getting credit in this economy. This is especially true for small businesses in southeastern Massachusetts and Rhode Island, a region which always seems to be impacted more severely. Many small businesses are having problems getting their credit lines renewed. Small businesses often rely on equity in their home for collateral for their credit lines. In many cases, the equity is no longer there and neither is the collateral. Small businesses no longer can obtain the working capital they need to operate their businesses.
In addition, many small businesses are showing losses due to the recession, and no longer have the cash flow necessary to repay loans. This is when an agency like SEED can help. We are ready to assist small businesses that are still viable and likely to weather this recession. We can look at the entire household of a small business owner and see if there is ability to repay the loan. For those small business owners who have had declines in their credit, we can look at credit scores starting at 600, as long as any issues can be explained. Most banks require credit scores closer to 700. The interest rate on our small loan programs is 6.9 percent fixed up to six years, and we can set up flexible payments as appropriate.
Although the SEED office in Taunton is only 30 minutes away from Providence, SEED will be staffing an office in Rhode Island on a part-time basis to be more accessible to potential small-business borrowers. SEED’s Web site, www.seedcorp.com, has most of the information needed by a small business trying to apply for a loan. SEED staff is also available to answer any questions. Laurie Walsh is SEED’s commercial loan officer for the small loan programs up to $100,000. She can be reached at (508) 822-1020.
