Tuesday, August 17, 2010

Another Business-to-Business Peer Lending Story

As the lending freeze for small business continues, business owners are continuing to find non-traditional sources of capital. In this case, a member of Chief Executive Boards International has discovered a privately-funded, privately managed small business loan program, sponsored by Michelin North America. He's expecting approval shortly on a $100,000 loan at prime rate with a 5-year amortization schedule. 

A consistently solid corporate citizen, Michelin realized that many businesses, whether directly connected to Michelin or not, were having trouble growing due to the current drought in available commercial lending.  So, they decided to do something about it, making $2 million available to businesses that were "disadvantaged" under a fairly broad set of criteria. In this case, "disadvantaged" includes economically disadvantaged -- like not being able to get bank financing because 2009 was a lousy year for your business.  Unlike the nonsense SBA ARC program, they're willing to loan real money -- up to $100,000 for up to 5 years at or near prime rate.

It's not a guarantee program that a bank has to buy into -- it's their own loan program, and applications are approved by their own staff. The application process is somewhat rigorous, as you'd expect, but the criteria for these loans are interesting:

  • Creation of Jobs -- Viable projects that can demonstrate the potential to create quality, sustainable jobs
  • Market sector and geographical location -- A start-up or existing small-and medium-sized businesses located within the trade area of their North American Headquarters
  • Viability -- Supported by a viable business plan, together with relevant financial information
  • Uses of funding -- Projects that are linked to the creation of jobs, such as purchase of capital equipment, process improvement, working capital and marketing. 
Note that applicants don't need to have a direct business connection to Michelin, such as being a Michelin supplier.  They grasp the idea that a solid small business base will strengthen not only their suppliers but also provide jobs for people who will eventually need tires.  

Michelin is providing the funding, and then outsourcing loan servicing to a local bank. Here's another example of a company that has a lot of cash on hand deciding to not only sweeten their return (they're not getting prime rate anywhere else) but also do something for the community, as well. They're betting they'll get the money back over the next 5 years, and so am I.   Link to Michelin Loans Site

If you've found similar non-traditional sources of lending in this upside-down financial market, please click "Comments" below and share them with others.

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Terry Weaver

Chief Executive Boards International


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