Arizona Gov. Katie Hobbs [D] made two stops in Clarkdale on Thursday, Aug. 8, to announce the creation of a new $5 million Arizona microbusiness loan program, approved last year by the Arizona Legislature to provide low-interest loans of up to $50,000 to Arizona-based businesses that employ five or fewer employees.
“We got this investment in last year’s budget, and we are excited for the ways it can help small businesses across the state,” Hobbs said to Larson Newspapers following Local First Arizona’s Rural Policy Forum at the Clark Memorial Clubhouse with local government officials and business owners. “We talk about huge investments that are coming with these big companies, but really, small businesses are the backbone of our economy, and need to make sure that they have the same chances to grow and thrive.”
“I think this is fantastic for the Verde Valley,” Camp Verde Deputy Town Manager Molly Davies said. “In economic development, there are so many components that help us to help small businesses, and this is the tool that we need. We’ve already seen it work for three of our businesses just in the last 20 months. And we know this is a need for other businesses.”
“One of the biggest challenges entrepreneurs face is being approved for loans to start or grow their businesses, said Kimber Lanning, CEO of Local First Arizona, an economic-development nonprofit that helped organize the events. “The governor’s visit to the Verde Valley underscores the huge opportunity that small business owners in rural and tribal Arizona have to drive this state’s economy. We are helping entrepreneurs in every corner of Arizona unleash their full potential with practical business knowledge, access to capital and supportive relationships.”
“Manufacturing furniture is a capital-intensive industry, so I sympathize with a lot of things I heard around the table,” said Arizona Rep. Seth Blattman [D-District 9], who sponsored House Bill 2732 last year which did not pass but is what the fund is based off of. He also runs his family’s furniture manufacturing business. “I’ve certainly been offered many predatory loans. In fact, I get a call every day offering me one.”
Blattman said that encouraging business growth would boost local economies, create jobs and prevent predatory lending.
“When you’re a small business, traditional banks are not interested in you, and they’re not interested in making small loans that make them a small amount of money,” Blattman said.
“I think the bigger problem is … no matter how great the startup business is, banks won’t typically loan to them if they don’t have two or three years of financial and track records,” Davies said. “With these microloans, we’re able to take a risk where the banks won’t for economic development.”
Growth Partners, Native Community Capital, Community Investment Corporation, Groundswell Capital, Border Financial Resources and the Verde Valley Regional Economic Organization are the six lenders for the program. Each can set interest rates and loan terms based on local conditions.
“We got a USDA grant for $200,000 and a loan from the USDA repayable over 30 years for half a million, and that created our original loan fund and that was about eight years ago,” Tom Binnings, a member of the executive board of VVREO, said of its Revolving Loan Program, which has loaned over $1 million to more than 20 local businesses since its launch. Loan terms are five years and businesses pay 6% interest. Binnings said that VVREO has “seen no defaults” on any of these loans.
The state’s loan program will follow the same model of making repaid funds available to other small businesses in Arizona, which employ approximately 155,000 people. The program is currently slated to run through 2029.
“While I was raised in a family that showed that having a small business was a possibility, my experience and my passion alone are not the boxes that need to be checked for a standard lender to give a small startup company money,” said Diego Apodaca, who runs a Cottonwood-based food truck. “I knew that if I wanted to make my dream [of] sharing my food a reality, I needed something different. I’m here today proud and honored to be a recent recipient of a VVREO microloan.”
VVREO has received $100,000 from the state’s new microloan program, which can be used with matching funds from the U.S. Department of Agriculture. VVREO is currently considering three potential local businesses for loans and Binnings said one of the loans will likely go before their board for final approval within 60 days.
