SHREVEPORT, La.-This year Shreveport FCU will focus on making more micro-loans to help small businesses in the Mississippi Delta and Shreveport areas.
In 2012 the credit union piloted a $50,000-max micro-loan program to keep each deal under the NCUA's definition of a business loan and not impact its MBL cap. CEO Helen Godfrey-Smith said the pilot was successful.
"Last year we loaned $600,000 to $700,000 to 25 to 30 small businesses," said Godfrey-Smith. "This year we expect to do a couple-million dollars. We put these loans on the books last year, watched them, and by the end of the year followed up with the businesses to see if they were able to accomplish what they planned and to see where they expected to go from there, as many had paid down a lump sum on the loan. Some farmers brought in their crops and paid off the loan."
Godfrey-Smith said the loans might seem small, but for a low- to moderate-income small business, $30,000 to $40,000 means a great deal in terms of operating capital or the ability to expand or add a an employee.
"There is no book on how to do some of these loans, and we have learned along the way and come up with best practices," observed Godfrey-Smtih. "We learned that the best folks to start with are seasoned businesses, as we are not financing dreams. We are looking to make loans to businesses that have been around for at least five years and have some stability."
Tracking Use of Funds
This year the $90-million CU will track more closely the use of the funds, added Godfrey-Smith. "We are fine-tuning that now, making sure the funds we loaned are for what the business plan said. We respect the knowledge of the business-owners and realize they may have to make some course changes. So if they borrowed money, say, for a tractor and then determined they needed a greenhouse, we want them to come back and tell us, and then share the impact on the business of the decision. This year we will hold the businesses more accountable for the use of the funds."
Godfrey-Smith noted that Shreveport FCU is also launching a mobile application this year to attract younger members, a key growth segment for the credit union, she said.