Lancaster SCORE, the organization of volunteer business counselors, has a new trick up its sleeve when it comes to helping people who want to start a business — a microloan program in partnership with the city of Lancaster.

People who go through SCORE's training programs, develop a viable plan for a business within the city and pass the muster of a SCORE review panel will be sponsored for loans from the city of between $1,000 and $10,000.

"It's a break for us, because no SCORE organization in the country has been doing this," said Andrew Zourides, the organization's chairman for the past two years.

ASSETS Lancaster, which also provides business training and counseling, will be sponsoring microloan applicants, too.

Zourides said he first approached Dennis Stuckey and Craig Lehman about the idea last year, shortly after they had been elected county commissioners.

He said Stuckey put him in touch with Randy Patterson, the city's director of economic development and neighborhood revitalization.

The fund
Money for the program will come from the city's small business revolving loan fund, Patterson said.

The fund is a pool of nearly $1 million that has accumulated through repayments from a now-defunct state economic-zone grant program, he said.

The city still reports to the state each quarter on how many jobs have been created through the fund.

In the past, Patterson said, the city has used the fund to provide loans to businesses to fill funding gaps for specific development projects.

About $50,000 a quarter returns to the fund in loan repayments, he said.

About a quarter of the fund, $250,000, is being set aside for the microloan program.

"The terms will actually be determined on each loan based on the proposal submitted," Patterson said, "but the likely terms will be somewhere in the neighborhood of a maximum of 3 percent interest."

In some cases, he added, repayment of the principal may be deferred for a brief period, based on the cash needs of the business.

"For the most part, the maximum term of the loan will be five to seven years," he said.

Patterson and his staff will review the applications, and if they concur with the sponsoring organization's recommendations, they will approve the loans after consulting with the mayor and the city's director of administrative services.

SCORE sponsorship
Jeff Schaum, a SCORE volunteer who teaches some of the organization's business workshops and monitors the subsequent success of its clients, will administer SCORE's portion of the program.

"I will help the client and counselor present their case to the city," Schaum said.

First, however, the prospective business owner will have to go through SCORE's business training program and work with one of its counselors to draw up a business plan to present with the microloan application. The owner will also have to provide SCORE with a credit rating.

"A lot of people rush into starting a business and have no idea about business," Zourides said. "They don't even know what cash flow is."

Once an applicant has a business plan and application in hand, he or she will have to go before a five-member SCORE panel, which will decide whether to recommend the application to the city.

The panel will consist of a financial specialist, marketing specialist, specialist in the applicant's field of business and two other SCORE members, Zourides said.

The applicant will also be required to sign a contract with SCORE to continue with its free counseling service for at least two years after obtaining the microloan and to undergo quarterly evaluations of the business.

"We'll monitor the performance of their sales, profitability, employee count," Schaum said. "If there comes a point where they're having trouble, we'll bring a team together to help them."

No applicants for the loans have stepped forward yet, Schaum said, but SCORE is "in the process of looking at the current clients in our pool to see if we can pilot [the program] with them."

ASSETS sponsorship
ASSETS Lancaster was approached early this year by the city about participating in the program, said Glenda J. Machia, the organization's president and chief executive.

ASSETS had its own microloan program years ago, funded through its founding organization, Mennonite Economic Development Associates, or MEDA, Machia said.

After Community First Fund opened, ASSETS began referring its clients there for financial assistance, she said.

Like SCORE, ASSETS will require loan applicants to go through its 13-week business-training program, develop a business plan and seek approval from a loan committee, Machia said, adding that the details are still being worked out.

"Our graduates don't even know this is happening yet," she said. "My expectation is that there will be a great demand for this."

As of the end of last year, she said, there were about 80 ASSETS businesses within the city.

Most of the people who go through the ASSETS training are low income, Machia said, and a microloan may be just the boost they need to start a business.

"For the population we're working with, $5,000 is a lot of money," she said.

Machia also expects that the businesses that do end up with loans will be faithful in repaying them.

"Microloans nationally have a 95 percent payback rate," she said. "I expect we'll have similar success with this program."

Just a start
SCORE's Zourides looks at the new city microloan program as just the first step in providing a boost to small businesses countywide.

He said Fulton Bank has also agreed to work with SCORE to evaluate the microloan recipients for additional loans when the startup requires more than the $10,000 microloan limit.

"The next step is to try to get a couple of banks in the county to provide a similar program" for startup business outside the city, Zourides said.

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Dennis Larison is editor of the business section and can be reached by telephone at 291-8753 or by e-mail at dlarison@lnpnews.com.