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More than Money: Big benefits result from small business loans through ASSETS Lancaster

LNP featured an article about our micro-loan program. To view the original post, click here.

A year ago this month, ASSETS Lancaster began a program that lent $13,200 to nine small-business owners looking to jump-start their enterprises and rebuild credit.

But the program provided more than money.

The group gathered regularly for business training, credit counseling and mutual support — activities that the aspiring entrepreneurs found as valuable as the loans.

“It was exactly what I was looking for,” said LaShonda Whitaker,  who got a $1,200 loan to buy supplies for Whitaker Family Child Care, which she operates out of her Lancaster home.

Whitaker just hired a part-time employee and said she wants to be in the next round of the expanding microloan program where $5,000 could be on the table.

Small loans, big hopes

ASSETS made the loans in March  2014 through the PRECAPS program of FINANTA, a Philadelphia-based microlender.

Modeled after successful international microloan programs, the loans of $1,200 and $3,600  were given at 9 percent interest.

The program also featured a “lending circle,” where the nine borrowers meet monthly to learn about business and to encourage each other.

“I think it is having the impact we wanted it to have,” Jonathan Coleman, program director for ASSETS.

The businesses represented included tax preparation, consulting, a hair salon, fashion design, landscaping, electrical, property management, day care and  antique window restoration.

The loans helped the business owners buy tools, supplies and equipment as well as gave them a chance to rebuild damaged credit.

“This was probably the first year that my credit score didn’t go down,” said Lindsey Gruber, a 27 year old who got a $1,200 loan for her side business, Gruber Accounting Services.

Of the nine people in the class, seven had their credit scores go up, with one person establishing credit for the very first time.

Of the six people who had their existing scores go up, the average increase was from 589 to 612.

And as of last Wednesday’s graduation, all but $280 of the loans had been paid back.

The one unpaid loan was to a business owner who stopped attending classes. The owner did not return calls from LNP, but Coleman said he expects the loan will be made good.

Any missed loan repayments are covered by a group escrow account, to which everyone contributed the equivalent of one month’s payment.

Michael Tull, 45, who got a $1,200 loan for his  UgLY 1 clothing line, said he wouldn’t be bothered by having to help cover someone else’s shortfall

“We all knew that going in,” Tull said. “We know that for the group that is here, we stayed loyal and we can still do it together.”

Small loans growing

Coleman said ASSETS, which assists entrepreneurs from underserved populations, learned enough from FINANTA to launch its own lending circles.

The next round will give out around $25,000, with possible individual loans up to $5,000 for those who completed the initial round.

The new loans are expected to close in early May.

ASSETS hopes to have several lending circles a year in Lancaster plus expand the program to York, Harrisburg and Reading.

To that end, ASSETS has hired a lending officer who begins later this month and will oversee the program. Coleman said it should be able to operate without FINANTA in about six months.

Coleman told the lending circle group at their graduation last Wednesday, “We were testing it this year and you’ve proven, through your hard work, that this can work.”

The graduation, which was held  in Southern Market Center at 100 S. Queen St., included food from Espino’s Pizza, whose owner Ramon Espino is part of a six-person lending circle ASSETS began in December.

Succeeding together

The lending circle borrowers universally praised the ASSETS program and the support they got from each other.

“The other business owners actually empower me to keep going when times get tough,” said Falesha Martin,  39,  who used a $1,200 loan to buy additional supplies and equipment for her salon, Turn N’ Headz weaving and braiding studio, including a hair steamer.

With a new round of funding, Martin said she would add a retail section to her salon.

James McFarlane,  33,  used a $1,200 loan to buy some tools for Bear Service, his one-man electrician business. McFarlane said a second loan could bring him closer to hiring another electrician and an electrician’s helper.

Rob Vital, 40, used the $1,200 loan to get some supplies and a new paint job for the van he has for his business, Vital Property Services.

Vital said he especially appreciated the accounting and bookkeeping help for his handyman service, which he has operated since 1998.

“I could do the work, but I’m not in business management,” Vital said.

Tony Russell, 38, used a $3,600 loan to buy a wood splitter so he could to augment his one-man landscaping business, Russell’s Lawn Care and Home Services, by selling firewood over the winter.

“I didn’t realize there was a firewood cult out there,” Russell said of the new line of work.

Gerald Simmons, a Lancaster pastor, got a $1,200 loan for promotional supplies for his consulting business.

Simmons, who is in his 60s, said the lending circle program provided a good starting point for business owners who are not sure of the way.

“It’s what I would call the on-ramp to the mainstream for small businesses,” he said.