Small loans could bring big opportunities

Usually, when Cedar Rapids makes economic development news, projects unveiled with great fanfare tend to be on the big side. A new company is moving to town, or an existing firm is expanding. The city awards tax breaks in the millions of dollars for jobs numbering in the dozens.

But this week, the big news was small.

Government, non-profit and development leaders announced an effort this week to provide microloans between $1,000 and $10,000 to small business owners with a dream and a need for some seed funding. Leaders envision women, minorities, low-income residents and immigrants, among others, tapping into microloan dollars to start new businesses.

The Greater Cedar Rapids Community Foundation is spearheading the effort, while contributing $25,000 to the loan pool. The city is chipping in $50,000 from an existing business loan fund. The East Central Iowa Council of Governments is administering the loans, with a point of contact for potential borrowers at the Cedar Rapids Public Library.

These small loans, for three years at 4 percent interest, could be a very big deal for local entrepreneurs long on ideas but short of funds, people with innovative concepts and basement businesses ready to grow. The city's core neighborhoods, in particular, could benefit from microloans that result in new business start-ups, which could spark broader business growth.

We think the program is a good idea, especially with the Kirkwood Small Business Development Center, SCORE and other entities providing mentoring and know-how to prospective borrowers on turning an idea, skill and dollars into a business. Education would seem to be a critical component for microloans to succeed.

Microlending is becoming a more and more common development tool in the United States. Springfield, Ill., just unveiled a $1.7 million microlending program earlier this week. Samuel Adams' 'Brewing the American dream” program has provided $6.4 million in microloans to food and beverage businesses since 2008. A 2013 study by Accion, a top microlender, found that 54 percent of business microloan recipients reported hiring, on average, 5.6 employees. And of small businesses that received loans in 2010, 97 percent were still in business in 2011.

Local leaders expect high interest in the program. We hope they're right, and that small loans add up to something big.

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