a “peer lending” approach that originated in the villages of Bangladesh. “Groups of entrepreneurs get together to discuss each other’s companies,” says Rice. “They share experience and expertise, and then eventually recommend one of the group members to get a loan. They have an incentive to make good recommendations because a default by a group member will reduce the amount we’ll lend to others in the group.”
Such success stories are common among Project Enterprise’s borrowers. “They go to group meetings, either monthly or biweekly, where they get real help with their businesses and with preparing loan applications,” Rice says. “Loans are generally meant to be repaid in 12 to 18 months at 12% simple interest. As the loan balance declines, so does each monthly payment.” To see if there’s a micro-lender in your area, go to www.microenterpriseworks.org.
The Small Business Administration has a MicroLoan program that makes funds available to nonprofit, community-based lenders that, in turn, make loans averaging $10,500. (The maximum is $35,000.) To find local intermediaries working with the SBA on this program, go online to http://www.sba.gov/financing/sbaloan/microloan.html. According to the SBA, participating lenders generally require some type of collateral and the borrower’s personal guarantee. Some micro-lenders, not necessarily working with the federal government, have other policies in place.
An “angel” is a wealthy individual willing to invest personal money into a business with growth potential. Wiley Mullins, who runs Uncle Wiley Inc., in Fairfield, Connecticut, found an angel who provided almost $250,000 on the strength of an improved business plan.
“I had received some SBA loans,” recalls Mullins, 46, a Procter & Gamble marketing veteran who started his spices-and-seasonings company in the early 1990s. “I was looking for more money in order to expand, but I didn’t find much interest among venture capitalists when I told them I had a food company.”
In 1999, though, a magazine article about Uncle Wiley helped attract the attention of a winged backer, a New York financier who prefers to remain anonymous. “Before I received the money,” says Mullins, “I worked with this angel on strengthening my business plan.” In effect, he repositioned the company.
“We sell ingredients that can be added to foods such as collard greens, sweet potatoes, and kale,” says Mullins. “Our products bring out all the flavor of such foods so you don’t have to add bacon or other high-fat items. Therefore, my new business plan treats Uncle Wiley as a wellness company, a theme we carry through on our Website. This is a much more attractive concept for investors.”
The angel has a 10% equity stake in the company and receives dividends on those shares. “He doesn’t try to tell me how to run the business,” Mullins says, “although he has put me together with other influential people, which might lead to more financing in the future. I send him regular reports to let him know how we’re doing.”
Uncle Wiley, Mullins reports, is doing just fine. “Because of the angel financing,” he says, “we were able to expand our product line, repackage