The Upper Cumberland Development District could soon use a new business loan program as early as next month.
Megan Choate serves as the UCDD’s Director of Lending and Economic Development. She said a growing economy has allowed the agency to focus on helping new and small businesses through its MicroLoan Program.
“The traditional loan program we have has had less volume and less need,” Choate said. “But we realized there’s a need for access to capital in the entrepreneurial community in the form of small-business loans and startups and some small expansions. So we have developed the MicroLoan Program as a way to meet that need.”
The UCDD’s Board of Directors approved the program during last week’s meeting. Choate said the loan program will be open to most businesses in the region ranging from startups to established companies.
“We will learn more as they work through the mentor programs and see who is a good fit,” Choate said. “We definitely want to help spur growth. We want to focus on businesses that are scalable and that this loan can really help just bump them in the right direction and start their success. We expect there will be a lot of startups but also some existing businesses looking to take that next step.”
Businesses interested in the program can apply for loans varying from $1,000 to $30,000. However, Choate said the new MicroLoan Program will be different from their traditional loans.
“The terms will be shorter than our traditional loan fund capped at five years, and then the interest rate will vary based on risk,” Choate said. “We have tried to keep that in competitive range less than credit cards and other forms of capital which are not sustainable. But because of the structure, it is a more risky program and will be slightly more than a traditional bank loan or our traditional program.”
UCDD officials said during last week’s meeting that interest rates could vary between seven and 14-percent.
Choate said the agency realizes the risk involved when granting loans to startup businesses.
“Because these are startup businesses that have not established themselves as far as our typical clients, we are aware that there are more loans that could default,” Choate said. “There’s a lot of potential job creation that could come from this. We’re excited and anxious to see what that balance looks like and we hope to help create a lot of jobs in the region.”
The UCDD will partner with the Biz Foundry and Tennessee Tech’s Small Business Development Center for the program. Choate said area businesses will have a chance to apply for loans within the coming weeks.