Small businesses in need of a quick, modest-sized loan often have little choice but to turn to high-cost, yet easy-to-access, alternative credit products. But New Mexico business borrowers have a new option.
Accion had long been looking for ways to speed up the process of making microloans to borrowers who don’t qualify for loans from traditional lenders and need a relatively small amount of money to take advantage of a time-sensitive business opportunity. Accion also wanted to help businesses respond quickly when faced with an urgent need.
Almost a year ago, the nonprofit lender began piloting quick-turnaround “Presto Loans” of $8,000 or less with interested applicants. The pilot project was a success – with 285 loans totaling $939,000.
Accion will soon to be ready to start launching its offering of Presto Loans, moving toward a one-hour turnaround time from loan application to funding by end of the year. Accion will be moving forward with this launch in the very near future.
The Presto Loan works by using technological advances to streamline loan processing, according to Metta Smith, director of lending and client relations at Accion’s Albuquerque office.
“One of the things many of our clients value about working with Accion is that we can be a relationship-based lender that gets to know a business,” she said.
Many business owners seeking an Accion loan traditionally have met with their loan officer in person, and up until now, Accion has processed all loan documents on paper or through a notary and scanning system if the client lives far from an Accion office.
The organization still follows that process with larger loans because of the greater risk involved. But for smaller loans, Smith said, it has grown increasingly important to offer a streamlined, and in some cases, completely online and electronic route to get a small loan quickly.
“It shouldn’t take days to find out if you qualify for an $8,000 loan,” she said.
Accion is using digital-data sources to verify client information rather than relying on self-reporting and voluminous supporting documents. It uses scoring methods that consider how well clients pay utility and other recurring bills, not just how well they repay debt, and this eliminates layers of underwriting.
“A huge subset of business owners don’t have a credit history,” Smith said, because the individuals conduct business in cash or are recent immigrants or young people without long borrowing histories. These are among the people Accion exists to serve.
Presto Loans give Accion – as a community development financial institution – a chance to help more entrepreneurs connect with community resources that can help them improve their money management and planning and reduce the need for last-minute loans.
“We want to get everyday entrepreneurs to a place where they have easy access to affordable credit options that allow their business and their family to thrive financially,” Smith said.
For more information about Accion and the Presto Loan, visit accionnm.org.
Finance New Mexico is a public-service initiative to assist individuals and businesses with obtaining skills and funding resources for their business or idea. To learn more, go to FinanceNewMexico.org.