Small business lender, Accion, will partner with Ridgestone Bank and the SBA to increase its maximum loan size through Community Advantage Program
Chicago.- (HINA) Seeking to alleviate a scarcity of affordable credit that has left many area small businesses with few options but the high-priced—and sometimes crippling—terms offered by an emerging market of predatory business lenders, nonprofit lender Accion Chicago announced today that it is increasing its maximum loan size to $100,000.
Accion’s decision to double its maximum loans from the current $50,000 cap represents a major expansion for the 20-year-old small business lender, which has grown its portfolio in the Chicago area. It also signals that microlenders—once considered somewhat of a fringe presence in the credit marketplace—have established themselves as an integral part of Chicago’s small business development infrastructure.
During the past five years, Accion has increased loan volume by 30 percent per year. During that period, small-business borrowers created or maintained more than 5,400 jobs, mainly in communities where unemployment has been an intractable challenge. In 2014, Accion’s 20th anniversary year, the organization is projected to make 500 loans totaling more than $4 million in Illinois and Northwest Indiana.
This growth has helped compensate for other factors in the marketplace that have created a difficult climate for small businesses borrowers. Recent data shows that small business lending from banks in the Chicago area has dipped considerably since 2008. Most banks will not make small business loans less than $100,000. The resulting gap in the market has proved fertile ground for an explosion of unregulated for-profit lenders to enter the space.
Accion’s new loan product, offered through the SBA Community Advantage program, strives to reach an increasingly vulnerable group of entrepreneurs, filling the entire market void left by bank contraction and reducing the demand for high-cost alternatives.
Ridgestone Bank, the top SBA lender in Illinois, will partner with Accion to manage the administration of the Community Advantage program, including servicing, and reporting to the SBA. Ridgestone Bank’s participation and support will enable a rapid scaling of this product.
“Ridgestone Bank is pleased to partner with Accion Chicago to assist in providing finance options to entrepreneurs and businesses in underserved markets,” said Thomas Abraham, Senior Vice-President, SBA Lending for Ridgestone Bank. “Our focus is on providing government guaranteed loans to small businesses and to ultimately help more businesses succeed, fulfilling dreams of business ownership.”
Accion anticipates disbursing more than $5 million in additional capital in the first year of this new program.
“Increasing access to loans up to $100,000 is vital to the growth of communities in the City of Chicago, Illinois, and Northwest Indiana,” said Jonathan Brereton, Chief Executive Officer of Accion Chicago. “Our new loan product will close the remaining gap in the market and directly impact neighborhood economic revitalization and jobs in our highest need areas.”
Community Advantage is a pilot initiative aimed at increasing the number of SBA 7(a) lenders who reach underserved communities, targeting community-based, mission-focused financial institutions which were previously not able to offer SBA loans. Community Advantage is open to mission-focused lenders, including Community Development Financial Institutions, SBA’s Certified Development Companies and SBA’s nonprofit microlending intermediaries. Community Advantage lenders will be expected to maintain at least 60 percent of their SBA loan portfolio in underserved markets. Through the Community Advantage Program, SBA offers an 85 percent guarantee for Accion’s qualifying loans.
Accion is a nonprofit small business lender that provides small business loans and financial counseling to entrepreneurs who fuel economic opportunity in their communities. From a $500 Credit Builder to a $100,000 loan for business expansion, Accion has the financial tools that entrepreneurs in Illinois and Northwest Indiana need to launch, operate, or grow. By providing loans up to $100,000 to qualified borrowers, Accion fills a gap in the credit market that large financial institutions don’t serve. Accion has been at the forefront of the microlending industry for 20 years.
Since 1994, Accion Chicago has made more than 3,600 loans totaling $28 million. Accion Chicago is an independent member of the Accion U.S. Network (us.accion.org), the largest micro- and small business-lending network in the United States.
For more information call 312/275-3000 or visit www.accionchicago.org.
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