For These Entrepreneurs, Microloans Are Where The Rubber Meets The Road

Most nights in Little Rock’s River Market, 29-year-old Gregory Wagnon will not be too hard to find.  Traveling along between hotels, bars and restaurants he can be spotted dragging around an unusual high-tech open carriage with a custom bicycle.  Perched on a seat behind him will usually be two, sometimes three passengers.  It’s a sight that’s never before been seen in the capital city.

It’s called a pedicab or bike taxi and has been a popular form of transportation in Europe and cities across the country for some time.  But Little Rock was void of pedicab service, and Wagnon an avid cyclist wanted to change that.  After riding on pedicabs in other cities, his dream was to establish such a service at home.  He decided to call his small business venture Little Rock Pedicab, but before he could begin rolling he had a major hurdle to overcome.  He needed five thousand dollars in financing to purchase his cab and for other start-up costs.  That’s an amount banks usually defer from loaning because it is too small, plus start-up businesses in most cases don’t have a bottom line banks can review.

“I tried banks to get a small business loan or a non-secure line of credit and because it was a start-up and wasn’t a business that was currently running I wasn’t eligible for any of the business loans because they wanted at least two years of performance from your business which I didn’t have,” said Wagnon.

And that’s where the non-profit microlending company ACCION came to the part-time pedicab driver’s rescue.  Besides Texas where it has headquarters in San Antonio, ACCION has loan operations in seven other states across the southeast and Missouri.  Established in 1994 ACCION has the largest microloan portfolio in the United States with a current average loan of $11,102.  The company says it’s made more than 12,000 loans to small business owners totaling $116 million, and has a payback rate above 95 percent.

Because most start-ups and established small businesses have limited access to traditional lending, ACCION’s sated mission is to provide credit and services via microloans to entrepreneurs that banks are unable to assist.  The microlender can fund up to $50,000 to start-ups and $250,000 for “established enterprises.” Besides helping those entrepreneurs strengthen their businesses and increase income, ACCION says its loans create employment and thus contribute to economic revitalization in their communities.

ACCION moved to Arkansas in the fall of 2011 with two state offices in North Little Rock and Helena-West Helena.  Its Arkansas marketing manager is Russell Hampton, a Little Rock native with extensive experience in the mortgage and finance industry.  He says since the company opened shop in Arkansas it has made 15 loans with more than $230,000 disbursed.

After submitting his business plan for Little Rock Pedicab and completing the application process, Gregory Wagnon got $5,000 of that total when no one else would listen.  He learned about ACCION from the manufacturer of the pedicab he wanted to purchase.  After contacting the local ACCION office and applying, Wagnon said they were extremely positive throughout the entire process.

“I really felt like they believed in me, unlike the traditional banks where you get turned down and no one gives you a chance, it was really a blessing to work with a company that said, ‘Greg I believe in you and you can do this and I believe you can be successful as well.’ So it really helped me not only just getting the money but helped uplift me and made me more confident about myself and my ability to start this business.”  A business Wagnon wants to expand to cover social events and conventions and eventually to a fleet of pedicabs and drivers.

Having clients believe in ACCION is at the center of the non-profit’s goal to support small business.  That’s no different in Arkansas where Hampton says there is a big need for microlending “for people that fall in that gap of not being able to get any type of financing from traditional sources.”

“Our typical customer is going to be the entrepreneurs looking to start a business or an entrepreneur maybe that is looking to get to the next level.  A lot of them that come to us, they are really varied, but a lot of them may be people who are doing some type of business in their home and they are ready to take it to the next level.  So, that’s mostly who we see.  Individuals who are needing 30, 25, 20, 15 thousand, 10 thousand.  You know really small micro-businesses.  People who may have two or three employees a lot of times,” Hampton said.

Clients like Carla Bryant who expanded her company, Ally’s Gourmet Jelly and Salsa in Hope with a $12,000 loan from ACCION Arkansas. Working with her two daughters, Bryant’s popular jellies, salsa and other specialty items had become much sought after in the Hope area with a lot of the profits going to support Bryant’s church and its missionary efforts.  Bryant a college professor at SAU’s graduate school of education says her salsa and jelly sideline business began originally as a fund raiser for her daughter’s band and then expanded to a store within an antique mall in downtown Hope along with festival and web sales.  ACCION helped her take Ally’s Gourmet Jelly and Salsa to the next level of its goal “to support the Gospel.”

Bryant found out about ACCION through the Women’s Business Center in El Dorado.  She wanted to go commercial to get her two main products, jalapeno jelly and salsa, in the retail market place.  To do that, she needed to outsource to a commercial processing plant.

“For liability purposes you really need to have your product produced at a commercial processing plant and so in order to do that we had to have about ten thousand dollars.  We needed professional labels and some different things and so we needed financing and so we did a consultation with the Women’s Business Center and decided to pursue a small business loan with ACCION,” Bryant said.

Bryant received her loan this past spring and because of it “We were able to have our batch produced which is about 3,400 jars of jelly and salsa and by doing that we could sell to Sav-A-Lot and some other different stores who require your items to be commercially and professionally produced,” she said.

Semi-retired Orby Partee from Clinton knows fishing.  He also knows fishing lures and thanks to a $30,000 loan from ACCION his Fliptail Lures are now available in ten Bass Pro Shops across the southeast, Texas, and Missouri.

He bought the molds for his lures back in 1990 but never really had the capital to get them produced.  Manufacturing requires very expensive equipment and an injection process to make his molds come to life with plastic worms, lizards and grubs in different sizes and colors.

Partee closed his loan with ACCION this past July and has been outsourcing the manufacturing to a plastics company in Mississippi, and is hoping Bass Pro will expand its orders and stores in the future.  He also has established a web site for online orders.

Partee says without ACCION’s help, “I could not have had the lures run to furnish Bass Pro.”

As a non-profit, ACCION receives national funding support from multiple sources. That funding ranges from grants and low interest loans from banks, to contributions from individuals, employees, foundations, and corporations.  In fact a $5 million grant from financial conglomerate Chase helped seed the Arkansas offices.

ACCION Arkansas also works with an extensive community of referring partners to help clients secure loans.  It’s usually a combination of other non-profits and state agencies. Those partners not only are used to helping potential borrowers with additional funding if needed, but in many cases can provide technical support to assist prospective clients in getting their loan applications and business plans together.  Marketing manager Hampton says that technical support is another cornerstone of ACCION’s loan services.

Hampton says ACCION’s interest rate in Arkansas starts at 9.25 percent and by state law is capped at 14 percent.  He stresses, “That’s a little higher than bank rates but terms are typically longer so we can get the terms out up to 60 or 72 months.  People don’t realize a lot of times that on a bank loan your terms may be significantly shorter like 12 or 24 months and that may result in a higher payment, plus we don’t have any pre-payment penalty.”

As far as ACCION’s future in Arkansas, Hampton says “We’d like to touch more borrowers, maybe 80-100 would be a good goal for us next year in Arkansas, and maybe reach a million dollars as far as the amount we disburse to small business owners.”  Long-term he would like to expand with two additional offices in the northwest and southern parts of the state.

On a personal note Hampton says, “When you close the loans and you see the people that have submitted all this stuff to us and gone through all this process to get the money and you hand them that check… that’s a good feeling because they are prepared to do some positive things.”