Utah Nonprofit corporation gets OK for rural small-business loans

Utah’s rural small businesses may soon have a new source of funding for start-up and expansion costs.

The Utah Business Lending Corp., a South Jordan-based nonprofit corporation, has received approval from the U.S. Department of Agriculture’s Rural Development office for funding that will allow it to issue micro-loans between $10,000 and $50,000 to businesses outside the Ogden-to-Spanish Fork corridor.

By Jenifer K. Nii
Deseret Morning News

http://deseretnews.com/dn/view/0,1249,595069223,00.html

The USDA’s Utah Rural Development office confirmed Wednesday that it has approved a $750,000 loan to the UBLC, which the UBLC will use to make loans to rural small businesses. Future UBLC funding needs will be reviewed annually.

The UBLC has not yet received the funds, but trustee Gordon Holt said he expects the bank to be "up and running" within a month.

The organization currently has two employees: Holt, a 28-year banking veteran, and an office manager. It also includes a seven-member loan committee and a seven-member board of directors.

"No one owns this bank. No one will sell it. There are no stockholders," Holt said. "I structured it like a credit union. There are no depositors; there are no checking accounts. The only thing we do is lending. The money we make for the bank just turns around and we loan it out again.

"The bank grows from the interest it’s making on its own. I think that’s what the government liked about it, because after a while the bank will just grow on its own."

Holt began working on the UBLC concept more than two years ago, after he retired from a local bank where he specialized in U.S. Small Business Administration loans.

"After I retired, I volunteered with the SBA, helping businesses get loans, and I came to understand that there were areas where people just couldn’t get money — between $10,000 and $50,000," he said. "If they wanted less than $10,000 they could usually put it on a credit card. If they wanted more than that, they’d have trouble, because many banks don’t want to loan less than $50,000."

Cynthia Hatch, vice president at Zions Bank and a member of the UBLC’s credit committee, identified two factors that motivated her to get involved: the UBLC organizers and the dearth of funding options for rural small businesses.

"I believe in the people who organized this bank," she said. "I have worked with several of them, individually and also in other businesses.

"I have been in government lending, the SBA program, for about 15 years, and am very intrigued by the differences and changes that go on in the SBA. But I also feel that banks, generally, as a whole, do not have programs available for really small businesses — the start-ups, the small businesses looking to grow. The concept here was to make lenders more willing to make the loans, and borrowers more capable of getting the capital they need."

Loans are available in cities that do not exceed 25,000 in population. Potential borrowers need a viable business plan and must show that they have attempted to obtain funding "elsewhere, at reasonable rates and terms." Borrowers will be evaluated and may as a condition of the loan be required to take a business course. The UBLC, via an $84,000 USDA grant, will reimburse the cost of the class upon satisfactory completion.

"The education component was very important, for us and the USDA," Holt said. "What we’re trying to do is help people become better borrowers, so their companies can succeed."

The bank will provide loans for business start-up, acquisition, upgrade, construction or expansion. It will loan money for the purchase of equipment or supplies, or for working capital. It will not provide loans for "agriculture production, golf courses, investment institutions or community antenna television services," according to a statement released by the bank.

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