“I guess I am just a positive person,” said Maria Gooch-Smith, executive director of the South Eastern Economic Development Corporation (SEED). She was speaking of her expectation that, as the weather warms, business owners will resume working on improvement plans that were put on hold during the winter. “People who are leasing space may see an opportunity to buy in this market,” she suggested recently.
After taking over the U.S. Small Business Administration microloan program in Rhode Island in December from the Rhode Island Coalition for Minority Investment (RICMI), Taunton-based SEED has arranged for commercial loan officer Laurie Walsh to work at least one day each week in Providence, stationed at the Rhode Island Small Business Development Center at Johnson & Wales University, according to Gooch-Smith.
SEED recently secured $1 million from the SBA for microloans, providing it with access to a total of $3.5 million for this program. “There is a lot of demand for these small loans,” Gooch-Smith said. Microloans of up to $35,000 are available for existing small businesses and startups, including home-based businesses. The term is six years at a rate of 6.5 percent fixed.
To obtain microloans, small-business owners need to have at least a 600 credit score and be able to explain delinquencies, according to Gooch-Smith, who added that SEED will review a small-business owner’s entire household income to see if there is enough for repayment. “SEED can be flexible with repayment terms and collateral, but we expect small businesses to stand behind their loans,” she said.
She recently returned from a Washington, D.C., conference on the SBA’s 504 loan program, attended by about 100 directors of lending agencies like SEED from across the country.
Asked what she heard while in Washington about the credit crunch, Gooch-Smith reported that she and her peers across the country continue to see this as a “major issue.” Banks must conserve funds to improve their balance sheets, she explained, at the same time demand is growing for business loans. Furthermore, businesses that rely on commercial and personal property as collateral can no longer do so due to reduced equity. “It’s a perfect storm,” she said.
For both the 504 and 7(a) SBA loans under President Obama’s recovery plan, according to Gooch-Smith, the federal economic stimulus package will cover the cost of upfront borrowers’ and lenders’ fees. Also, the guarantee on 7(a) loans has been raised to 90 percent under the recovery plan. Both provisions are temporary for the 2009 calendar year or until funds are exhausted.
The elimination of loan fees, Gooch-Smith noted, is a “boost” for borrowers and lenders because the fee can be as much as 3.5 percent of the loan amount or as high as $50,000 on a large loan. Federal law made the fee waiver effective as of Feb. 17, the day the American Recovery and Reinvestment Act was enacted, and the SBA has said it will refund fees paid on loans since then.
Gooch-Smith noted that information about SEED and its loan programs, including application forms, are available on the agency’s Web site, www.seedcorp.com. SEED has handled $6.6 million worth of Massachusetts microloans in the last 10 years. The agency took over the microloan program in the Ocean State at the request of the SBA and RICMI, due to the latter’s limited resources, late last year. •
