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Member News: C.C. Eship / NACCE Journal Spring/Summer 2008

MicroBusinesses Bank on NanoLoans

Friday, March 12, 2010   (0 Comments)
Posted by: Matthew Montoya
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By Sethanne DeGabriele
Director, Marketing and Community Relations
North Iowa Area Community College

How many times have you met with a would-be entrepreneur or new start-up business that had a good business concept, solid work ethic and no money? For the staff at North Iowa Area Community College's John Pappajohn Entrepreneurial Center (NIACC JPEC), that frequent occurrence stimulated them to try and come up with a solution for these pre-bankable companies. Inspired by Nobel Prize winner Muhamed Yunis' work in microcredit, the JPEC staff pursued $25,000 in seed money to see whether modest loans would be enough to move microbusinesses to the next level.

Dubbed NanoLoans, they are a North Iowa derivative of microloan programs used successfully for several decades in Africa and India to stimulate small business development. Many of those loans are for only one hundred or two hundred dollars, but have had phenomenal social impact by enabling sustainable businesses. In its North Iowa version, loans up to $2,500 can be used to move a business model farther along in its development by paying for prototype development, patents, equipment, working capital and other start-up costs.

"Making a series of small, uncollateralized loans at the prime interest rate to new entrepreneurs without many assets is not considered a solid growth strategy in the banking industry, so the program was initially greeted with a certain amount of skepticism,” observed Ted Bair, Small Business Development Center Director. "To be successful without collateral, we had to find different C's to focus on. We chose Character, Concept and Commitment.”

"A significant part of my job is working with new businesses and new businesspeople. As their concept unfolds and they begin developing their business plan, I am in a perfect position to see if they are a good NanoLoan candidate,” continued Bair. "As part of their NanoLoan commitment, they are required to take the FastTrac® NewVenture™ course. We call it a ten-week ‘business boot camp,' but you cannot argue with the results; 78 percent of the over 200 businesses started the last seven years by graduates of NIACC's FastTrac® NewVenture™ course are still in business. Compare that to an average failure rate of 60 percent! Of equal importance, we have had a loan default rate of 0.0 percent. In fact, two became so successful that they paid off their loans early.”

"The impact of the NIACC JPEC NanoLoan program in North Iowa has been exciting and surprising,” said Jamie T. Zanios, NIACC JPEC Director. "Now we have multiple funding opportunities for the smallest organization up through the largest companies in the region, available in one spot. We can help create the business plan, help source different financial resources and offer ongoing consultation and support to help new businesses become successful. But a more significant measure of the program's success is in the businesses that NanoLoans have helped.”

NanoLoan Recipients

Michael Groesbeck has a powerful vision; linking diverse home-based businesses in North Iowa together in a comprehensive Web site that is more attractive to search engines. The NIACC NanoLoan program helped him make that vision, www.iowahomebusinessexchange.com, a reality.

"Every business and their brother are on the Web,” Groesbeck said. "The challenge for a small home-based business is to break free of the clutter and get your products or services noticed for a reasonable cost. Most struggle with a lack of tech support and money to create a presence on the Web. I can come in, create a storefront for them that includes high quality photographs and integrate everything into a Web-based community where their goods and services can be found–without breaking the bank. If it hadn't been for the NanoLoan program, I would have probably delayed things to put together enough money to ‘bootstrap' the start-up. Because NIACC and the John Pappajohn Entrepreneurial Center put this together to help entrepreneurs, I can pursue my dream right away.”

Anne Anderson is the owner and creative force behind Interwoven: Textiles for Spirit and Space (www.interwovenstudio.com). Anderson received a $2,500 NanoLoan for building improvements, marketing, materials and supplies.

Anderson designs and creates custom, hand-made paraments and banners for megachurches and vestments for pastors serving congregations in the Midwest. Over the past 10 years, she did this work on a part-time basis as a hobby. With the help of the Small Business Development Center and the NIACC JPEC NanoLoan, Anderson is now able to operate as a sole proprietorship full-time.

"My products provide a vibrant, visual focus that reflects the vitality of a congregation and supports the teachings of the church and its greater mission,” Anderson said. "The SBDC at the NIACC JPEC is so easy to work with and provides a wealth of resources for people both starting business as well as those who are already in business.”

For more information on the NIACC JPEC NanoLoan program, call (641) 422-4342 or visit www.niacc.edu/pappajohn.


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