Designed to increase entrepreneurship, micro-
loans are portrayed as an easy to obtain, sim-
ple solution, for startup funding.
Microloans aren’t new. But, for some
small business owners, it is hard to get their
application approved. “We look at a number of
factors when we are reviewing a microloan
application” - says Joe Shure, co-founder of
The Intersect Fund. An organization that helps
small businesses grow through various train-
ing programs. “First, we want to ensure the
applicant has enough income to afford month-
ly loan payments. It would be irresponsible of
us to lend to someone who lacks the cash flow
to make his payments, no matter how intri-
guing his business or idea is. To enforce this
policy, we verify an applicant’s income by
looking at his tax returns and bank state-
ments. We also ask him to complete a form
on which he estimates his monthly income
and expenses.”
Before the application process, entre-
preneurs need to check their credit history.
Obtain a credit report from each of the three
major credit reporting agencies: Experian,
TransUnion, and Equifax. These reports are a
record of your individual or company’s finan-
cial behavior. Financial institutions don’t al-
ways report to all three agencies alike. By
getting a report from each credit bureau, this
will allow for an accurate, up-to-date view of
all your financial history. “Applicants’ credit
histories also come in to play” - says Joe. “We
are more forgiving on this front than the big
banks, but if an applicant’s credit history
shows a pattern of irresponsibility, or if it
shows they are behind on mortgage or child
support, we will deny the loan. I should note
that in addition to offering business loans, we
offer a special “credit-builder” loan designed
to help borrowers build credit.”
Burning bridges isn’t something you
want to do… ever. You never know when you
are going to need a reference. References are
just as, if not, more important to getting fi-
nancing for your startup. It tells what kind of
person you are. “Once we determine an appli-
cant’s income is sufficient to make his or her
payments and that his or her credit is halfway
decent, we seek references. These usually in-
NOVEMBER 2012
WWW.TOMIMAGAZINE.COM
22
FORECAST
IN MORE WAYS
THAN ONE
J
OE
SHURE
-
clude the applicant’s landlord, someone with
whom he has done business, someone he
knows from the community, and one other
person. We ask these people what they think
the applicant would do if he were unable to
make a payment, and whether they would
lend to the applicant.”
“
Our underwriting process might seem
pretty similar to those of most banks. While
the concepts are the same, the numbers and
tolerance levels are different” - says Joe.
“
Banks, for instance, are generally unwilling to
disburse a commercial loan of less than
$25,000—doing so would be unprofitable for
them. We will disburse loans of as little as
$500. Also, we have a higher tolerance for
applicants who have bad credit or lack it en-
tirely. Last time we checked, the median cred-
it score among our borrowers who have one
was 599. Approximately 40 percent of borrow-
ers had no score.”
When applying for a loan, be sure to
thoroughly read the entire application. Make
sure that what you are entering is true infor-
mation because a lie can cost you. “We re-
ceive hundreds of applications per year, and
we see some common—avoidable—mistakes
Joe Shure
Co-founder,
Intersectfund.org
link
link