Micro Loan Fund Passes $1 Million Milestone

February 24, 2014
By Paul Wenske, Senior Community Development Advisor


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The micro loan fund expects to close 200 loans in 2014.

Two years after its launch, the Kansas City Regional Micro Loan Fund has generated nearly $1.5 million in loans for approximately 150 entrepreneurs, more than 50 percent of whom operate minority-owned businesses.

The fund is one of the “fastest growing” in the country, said Galen Gondolfi, a spokesperson for Justine PETERSEN, the St. Louis community development financing organization that administers the fund.

The Kansas City Fed facilitated meetings of the regional government and nonprofit partners that were instrumental in launching the fund in January 2012.

Partners included, among others, the SBA, the Women’s Business Center, U.S. SourceLink, the Women’s Employment Network and the Kansas City, Mo., Community Development organization (KCMO CDE), which assists businesses in distressed areas. About 12 banks have since joined as contributing partners.

City officials in Kansas City, Mo., contributed more than $50,000 in loan loss reserve funds to leverage additional lending from banks and other lenders. Kansas City Councilman Scott Taylor said the fund was developed at a time when “it was difficult to get a loan for a lot of small businesses.”

Filling a need

The creation of the regional loan fund filled a need because the area had gone without a microlending program for more than three years.

The success of the loan fund in Metro Kansas City, which straddles the state line between Missouri and Kansas, is an example of the “pent up demand” for loans to start small businesses throughout the country, Gondolfi said.

 “We feel that what’s been a pivotal success in Kansas City has been the collaborative network of partners,” Gondolfi said.

“There’s no way you can do this alone,” he added.

The program, which includes a training component and assistance with raising credit scores, makes loans from a few hundred dollars to $50,000. The average loan is $10,000, Gondolfi said. 

Interest rates on SBA loans provided through the program start at 7.5 percent. Loans Justine PETERSEN provides through its own Community Development Financing Institution (CDFI) have rates that cap at 13 percent.

The loans are amortized over periods ranging from one to 5 years, Gondolfi said. He said the default rate on loans has remained less than 2 percent.

A key objective is to help small businesses grow to the point they can reach out to larger mainstream lenders. The micro loan program is projected to close on 200 loans in 2014, or more than 15 a month. “The goal in Kansas City is the sky’s the limit,” Gondolfi said.

Learn more about the Justine PETERSEN microloan program.