Small businesses around the country have been complaining about the lack of funds out there. But the lackluster performance of one microloan program shows that money won’t solve all the problems.
In Washington D.C., a recently formed microloan program faces an unexpected problem: not enough applicants. Only 15 companies have applied for the funding, according to this story in the Washington Business Journal. Through the program, small businesses can apply for low-interest loans of up to $25,000, depending where they’re located.
Some small businesses are too troubled to think about applying for loans. “You get people so drilled and focused on, ‘Oh my god how am I going to survive,’ that they are ostriches for a while,” says Donna Grigsby, the executive director of the nonprofit that operates the program.
The Washington program is a pilot, set to expire next year. It could be expanded, though, if it’s successful.
The challenges at the program are a sign of the multi-layered problems small businesses face. Because of depressed revenues and cash flow, some business owners are so convinced they’re no longer creditworthy that they’re not bothering to apply for funding. Small-business owners have long complained that loosening lending standards isn’t enough to pull them out of the recession – particularly when the loan programs require certain levels of cash flow that eliminate many start-ups.
Critics also charge that the program wasn’t well-publicized and many business owners may not have known about it. That’s something to keep in mind as more government-funded programs get rolled out across the country.
Readers, do you think loan programs like this one can help struggling small businesses? What do you think is keeping more small businesses from applying?
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