Microloans increasing in popularity for Florida small businesses

Green Grease Biofuels Inc. envisions money to be made in collecting cooking oil from Jacksonville, Florida, homes for conversion into biofuels.

Other companies collect cooking oil from restaurants, but branching out with curbside collection of grease used in residential kitchens isn’t an easy concept to pitch to bankers for a traditional loan.

So Green Grease Biofuels is seeking to grease its finances by turning to microloans, which are smaller loans ranging from $500 to $50,000.

“Microloans are the lifeline of our company,” said Charles Payne, managing director of the company.

It’s a form of financing that’s becoming more accessible to Northeast Florida businesses.

After the U.S. Small Business Administration signed a memorandum in 2012 with the city of Jacksonville to promote microlending, the agency certified Accion USA to do microlending throughout the state.

The Small Business Administration also certified the Black Business Investment Fund, which is based in the Orlando area, to make microloans in Duval County.

Mayor Alvin Brown praised the Small Business Administration’s microlending initiative, saying “the very best ideas of today can become the storefronts, services and job creators of tomorrow.”

The city of Jacksonville plans to start its own multimillion dollar microlending program for its Northwest Jacksonville Economic Development Fund, which targets assistance to businesses in neighborhoods facing high poverty and unemployment rates.

The goal is to roll out that program in late fall or early winter, spokesman David DeCamp said.

Microloans come with above-average interest rates. Accion USA’s interest rates range from 8.99 percent to 15.99 percent, and the payback period is typically a couple of years, said Fabiana Estrada, manager of Florida lending at an office in Coral Gables.

Most loan recipients have been in business for one or two years, though Accion has helped a lot of businesses that have been around 10 to 15 years, she said. The loans might help a restaurant buy a new walk-in freezer, a home-based business develop a website, or a truck driver purchase a rig.

Though Accion is willing to take some risks that banks don’t, applicants have to show they have an income stream, not just that they have an idea for starting a business.

“There’s no way that Accion can give you a loan unless you have a steady source of income,” Estrada said.

Despite the limited money in microloans, they do make a difference for businesses, said Jackie Perry, executive director of Beaver Street Enterprises, a nonprofit business incubator in Jacksonville. Beaver Street Enterprise Center offers microloans up to $25,000 for its tenants and recently expanded microlending to other businesses after Wells Fargo donated $50,000.

“I think they fill a very vital niche,” Perry said. “The microloans have a little more flexibility. They’re very helpful, particularly for companies that are just starting out.”

She said the concept got renewed attention when banks put the brakes on lending in the fallout of the Great Recession.

“That opened the door to looking at alternative ways of funding businesses, and microloans became a catalyst for that,” she said.

In terms of access to microloan programs, Jacksonville had been behind the curve until recently, said Paul Arrington, certified business analyst with the Small Business Development Center at the University of North Florida.

“Any form of access to capital is welcome these days,” he said. “Now is a good time if you’re looking for a microloan in Jacksonville.”

Green Grease Biofuels, which has incubator space at Beaver Street Enterprise Center, obtained a $25,000 microloan from the center. The company plans to seek another microloan from Accion.

Payne said the loans will finance the purchase of the plastic bins that residents can put grease into for pickup by the company. Green Grease Biofuels also will step up advertising, touting the environmental benefits of recycling cooking oil rather than dumping grease down drains, in the ground or at landfills.

There’s no charge for residents to participate. The payoff comes when the grease is sold as a feedstock for producing biofuels. That makes marketing crucial to the company’s business plan because the more cooking oil it collects, the more it can sell.

“With this container, we can pretty much drill into everyone’s kitchen,” Payne said while pointing to the recycling tub. “This is my oil platform right here.”

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