MicroCredit-NH helps small businesses blossom

A small crowd recently gathered in the basement of The Portsmouth Brewery to hear Stacey Mitchell, author of “Big Box Swindle,” explain how small, locally based businesses benefit a community. While the audience sipped locally crafted brew, Mitchell urged people to help create an environment in which local, independent businesses can thrive. One way to do so is by giving entrepreneurs the tools they need to start their own operations.

Since 1996, MicroCredit-NH has been providing small business loans, technical assistance and networking opportunities to “micro-enterprises” throughout the Granite State. “Our mission is specifically to serve very small businesses,” said Jennifer Murphy Aubin, southeast regional manager for MicroCredit-NH. Murphy oversees eight business groups on the Seacoast, which include about 65 businesses.

MicroCredit-NH defines a small business as any operation with five employees or fewer, including the owner, which have gross sales between $1 and $500,000 and require less than $35,000 for start-up capital.

The micro-credit program is based on a peer-lending model developed by Grameen Bank in Bangladesh in the 1970s. Small loans are given to a peer group, which serves as a support network and security net for its members. Grameen and its founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize in 2006 for their role in reducing poverty. Many economists praise the model because it uses free market principles instead of free handouts. A pilot program tailored for New Hampshire was established in the 1980s by the New Hampshire Community Loan Fund, a charitable nonprofit established in 1962 to help people achieve self-sufficiency through access to affordable housing and business loans. In 1996, after experiencing early success, MicroCredit-NH was formalized as an official NHCLF program.

If an entrepreneur wants to start his or her own business but doesn’t have the funds or the know-how to get it running, the first step is to contact a regional manager from MicroCredit-NH, who then sets up an orientation with four to six other inductees. At the orientation, each participant receives a binder with 20 case studies of businesses in various stages of development. The case studies include breakdowns of business plans, budgets and marketing campaigns.

The next step is for the regional manager to organize new participants into business groups. Except for the orientation, all of MicroCredit-NH’s services are accessed through this peer support network. The groups consist of four to 10 members and have names like “Empowered Entrepreneurs” or “Achieving Momentum.” Aubin oversees business groups in Raymond, Portsmouth, Rochester, Rollinsford and Newmarket. 

By working in this group fashion, participants dispel the feelings of isolation that often plague small business owners.
“They are usually a sole proprietor or in a partnership, and they might be thinking great thoughts, but they’re making decisions alone,” Aubin said.

Last year, Roxie Zwicker became the chairperson of “Empowered Entrepreners.” Zwicker is the owner of New England Curiosities, which offers tours based on local legends, lore and mystery. Her most popular tour is the Haunted Pubs of Portsmouth tour, where guests visit seven historic taverns from the 18th century to present times. Zwicker’s involvement with MicroCredit-NH began three years ago, when her Portsmouth-based business was experiencing significant growth.

Since joining, Zwicker has taken two loans from MicroCredit-NH. She used the first for advertising expenses and the second to expand into a physical location at 177 State St. in Portsmouth, downstairs at Molly Malone’s. She was able to purchase audio-visual equipment and offer afternoon tea to guests.

In addition to the loans, Zwicker is pleased with how MicroCredit-NH links entrepreneurs with business groups.

“The business group presents people with the opportunity to create monthly goals and be held accountable to meet those goals and to learn from others who may have been in the same situation in their businesses,” she said. “We network through each other, and we really provide support through each phase of someone’s business. Everyone is enthusiastic about sharing ideas and coming up with resources for each other to use.”

Each group is also an approved lending body that reviews the loan applications of new members. Although they function in a more informal environment, the groups ask to see an applicant’s business plan, marketing plan and financials.

“It replicates the experience of going to a bank,” Aubin said. If the plan isn’t up to par, the group will suggest ways to improve it before reapplying. Every loan must be approved by a unanimous vote.

The program’s lending capacity is $15,000 for each individual applicant. The loans have a 10 percent interest rate, which is competitive with rates at traditional banks, Aubin said. For loans under $5,000, no credit checks or collateral is required, making the process attractive for applicants with poor or limited credit histories. According to Aubin, the repayment rate on loans is 95 percent, which is much higher than that of traditional banks. It’s the business group, which acts as a support network and system of accountability, that keeps the repayment rate high, Aubin said.

For Zwicker, the experience of accessing a loan was just as important as the money itself.

“When it came time to do the loan, I realized that I could learn a lot from the process of applying for a loan and seeing if it would really be the right thing for me,” she said. “I had to do in-depth marketing plans, business plans and other things that made me look objectively at my business. Plus, making the presentation to my group to see if they would approve the loan presented me with feedback, which I thought was invaluable. Plus, I am accountable to my group should I miss payments.”

In New Hampshire, MicroCredit includes 60 business groups, with 400 members. Businesses can include anything from a farm to a hair salon. Two of the groups focus on fine arts and crafts businesses.

Such micro-enterprises have a huge impact on the state’s economy, employing more than 160,000 individuals and allowing communities to retain up to 60 percent of the profits earned by small, local businesses.

“As a whole, that means such great things for an economy and diversity, when the jobs stay in the community,” Aubin said. Micro-enterprise represents 18.5 percent of all private (non-farm) employment in New Hampshire, according to MicroCredit-NH’s Web site.

Between 2000 and 2003, entrepreneurs using MicroCredit-NH experienced a 22 percent (or $5,500) average increase in their family income, a 72 percent (or $9,750) average increase in business gross sales and a 19 percent (or $900) average increase in owner’s draw.

“Many of the business have outgrown our lending and moved on to banks. We’ve become a great feeder system,” Aubin said. She holds business hours at Citizen’s Bank in Rochester, where participants can access her services and get used to the experience of doing business in a bank. “Most banks would like to be as small business friendly as possible, but there are capacity issues and certain limits,” Aubin said.

MicroCredit-NH’s latest offering is a health care directory to assist small business owners looking for affordable health care.