Microlending activity returns to life

Lending activity is beginning to stir at a program that helps finance some of the smallest and riskiest of start-up businesses in Nevada.

The revival of activity at Nevada Microenterprise Initiative comes as rattled entrepreneurs start to regain the confidence they lost in the recession that deepened last year.

A significant number of the new loans will be for less than $5,000, said Nancy Erends Bahr, Reno-based executive director of Nevada Microenterprise Initiative.

She said the nonprofit organization hopes to close four of those loans a month.

The organization, which makes loans ranging from $100 to $35,000, today has 114 loans on its books.

Its portfolio totals nearly $1 million.

Most of those loans, Bahr said, are to high-risk borrowers who can't get traditional business financing through banks.

At the bare minimum, she said, many of them are starting businesses from scratch, a type of lending that banks won't touch.

Others may have troubled credit history.

"Almost all of our borrowers have been turned down by a bank," Bahr said.

"But we look at everyone individually.We don't pre-judge.We do a lot of character lending."

Even so, she said delinquency rates in the Nevada Microenterprise Initiative loan portfolio run about 15 percent in most months, and the organization typically writes off 3 percent to 5 percent of its portfolio annually.

The organization's interest rates reflect the risks it's taking.

A loan that would carry a 9 percent rate at a commercial bank, Bahr said, could cost as much as 13 percent at Nevada Microenterprise Initiative.

The organization makes its loans with money it has borrowed from the U.S.

Small Business Administration.

It covers a portion of its costs with the spread between its costs of borrowing from the SBA and the rate it charges borrowers.

Nevada Microenterprise Initiative also seeks to reduce its lending risks through the classes and other training it provides to would-be entrepreneurs.

No business, for instance, can borrow from the organization before it completes a business plan, and the organization provides training to get that job done.

Bahr said a basic class in business development sometimes discourages would-be entrepreneurs from pursuing ideas that are almost certain to fail, and she considers that to be a victory as well.

Much of the organization's growth in coming months is expected to come from the program it's dubbed "the mini NMI" the loans of less than $5,000.

Kerry Houlihan, the program manager who oversees those loans for Nevada Microenterprise Initiative, said the small loans require less paperwork and can be approved with seven to 10 days.

"There's a great need for simplification and fast turn-around," she said.

Many of the people who borrow from the Nevada Microenterprise Initiative are referred by commercial bankers, and Bahr said the organization's goal is to return the favor.

"Our whole point is self-sufficiency," she said.

"We want to get people bankable."