Mini-Loans in Mini-Towns Produce Mini-Businesses about 100 Nonprofit Groups Are Funding Small New Enterprises

By Carolyn Johnsen, Monitor | The Christian Science Monitor, March 26, 1993 | Go to article overview

Mini-Loans in Mini-Towns Produce Mini-Businesses about 100 Nonprofit Groups Are Funding Small New Enterprises


Carolyn Johnsen, Monitor, The Christian Science Monitor


EIGHTEEN posts sunk in a rectangular pattern in the soil behind Cathy Goslin Smith's house are the "roots" of a greenhouse and landscaping business she is starting in the little community of Rosalie, Neb.

Her business has been supported by a $650 loan from the Rural Enterprise Assistance Program (REAP) of Walthill.

"I wouldn't have been able to think of starting a business without REAP," Ms. Goslin Smith says.

REAP is one of about 100 nonprofit organizations in the United States that are redefining the "small" in small business. These groups provide modest loans to storefront and home-based businesses typical of those run by self-employed people.

A 1989-90 study by the Center for Rural Affairs in Walthill found that 51 percent of all income in the farm-based counties of Iowa, the Dakotas, Minnesota, Kansas, and Nebraska comes from self-employment.

"There has been no rural development strategy that attempted to build on this fact," says Gene Severens, REAP project leader.

So the Center for Rural Affairs developed REAP, which made its first micro-loan to a small business in 1990.

Until recently, REAP loaned money from grants given by the Ford and Charles Stewart Mott Foundations. In summer 1992, the US Small Business Administration (SBA) approved REAP's request for an $80,000 loan. Thirty-four other nonprofit micro-enterprise groups in the United States also received SBA loans ranging from $80,000 to $750,000. REAP will use the SBA money as loan capital for seven associations of small businesses in northeast Nebraska.

"What's intriguing about REAP is that it's ... in such a small town, and yet it's so incredibly sophisticated as to be competitive" for the SBA loans, says Dwight Johnson, SBA public information officer in Omaha.

Walthill, population 747, is in Thurston County, one of the poorest counties in Nebraska. But business is growing.

Goslin Smith is chairwoman of Double W Enterprises, a REAP association of eight self-employed people in Walthill and Winnebago. From this "borrowing group," six members have taken out micro-loans ranging from $250 to $2,000 - peanuts to the SBA. By SBA standards, micro-loans are $10,000 to $25,000, Mr. Johnson says; the average size of an SBA loan in Nebraska is $180,000.

Rose Jaspersen, REAP's assistant project leader, cites three gaps people face "between the wish to start a business and actually starting one: financial, training, and networking." REAP tries to bridge all three gaps.

When entrepreneurs want to form a borrowing group associated with REAP, they must raise a community contribution of at least $1,000. …

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