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MONTANA'S MICROLOAN PROGRAM

MONTANA'S MICROLOAN PROGRAM: Access to start-up and operating capital is a major barrier for individuals with severe disabilities. Assisting these individuals with securing capital is the crux of the Montana microloan program. The microloan program was established in Missoula, Montana in early 1999 through a collaborative project between the Montana Community Development Corporation (MCDC), the Rural Institute at the University of Montana, and the Missoula City Council.

The Rural Institute has been assisting entrepreneurs with disabilities by generating business plans and incubation funds through grants, via:

Vocational Rehabilitation (nationwide, Vocational Rehabilitation funds about 5,000 small business start-ups annually),

The Montana Job Training Partnership (Job Training Partnership Act/U.S. Department of Labor), and

The aggressive use of Plans for Achieving Self Support (PASS) through the Social Security Administration.

START UP ISSUES: Unfortunately, many individuals with disabilities are not able to generate the funds necessary to launch their businesses due to the:

inability to qualify for credit,
limited funds and policy restrictions of the general rehabilitation system, and
perceived risks of their Social Security benefits.
STAFF TRAINING: To address these start up issues, the Rural Institute and MCDC approached the Missoula City Council for funds to cross-train each others' staff in:
business planning,
loan processes,
disability awareness,
rehabilitation system policies, and
Social Security regulations.
While most of this work has been accomplished through collaborative training sessions, money was needed to establish a Risk Pool to pay off bad debts in case an entrepreneur defaulted on a loan.

RISK POOL: The Missoula City Council provided $10,000 to establish this safety net, thus allowing entrepreneurs with disabilities to access approximately 5 to 12 loans annually ranging between $5000 and $50,000 per year. MCDC has high risk loan funds available for small business and creating the Risk Pool allowed individuals with poor credit ratings to access the funds for business start-up and expansion.

REFERRALS: to the loan fund will come primarily from the local Vocational Rehabilitation office (although the Montana Job Training Partnership, the Rural Institute, and other service providers may also make application). The general flow of the loan process will be:

Referral to the Rural Institute by Vocational Rehabilitation to consult on the business idea and to investigate the use of Social Security Work Incentives, such as PASS;

Referral on to MCDC for feasibility, business plan refinement, and market demand research;

Possible loan guarantee sign-off by the local Vocational Rehabilitation office;

Final loan package design and submission for funding.

MCDC is particularly skilled at small business start-ups and generally servesnon-traditional customers through their loan programs and their SmallBusiness Development Center funded through the Small Business Administration.

EXPANSION: This pilot project has lead to submission of a foundation grant to expand the loan program into several rural communities across Montana. Currently there are several entrepreneurs developing their ideasand business plans. And, perhaps the most exciting aspect of this loan fund is that it is replicable in most communities across the United States with only a minor amount of money needed to access existing loan funds.

For further information, contact:
Cary Griffin at the Rural Institute (406) 243-2454; or
Rosalie Sheehy Cates,the Executive Director of MCDC (406) 543-3550