In February 2009, when the Recovery Act was signed into law, the federal government set up $56.1 million for microloans for small businesses … maybe to make up a little bit for the billions that was handed out to the big banks. One of the groups able to take advantage of that money has been the small biodiesel producers.
This article from Biodiesel Magazine points out how one East Coast biodiesel producer has been able to take advantage of those Small Business Administration loans to keep afloat in these days of no $1-a-gallon federal blender tax credit:
“It’s very difficult to get any kind of credit now,” says founder and CEO Brent Baker, adding that he was turned down by three major commercial banks that had previously financed his company, prior to turning to Boc Capital. “It was just a hard sell [to commercial banks] to get any type of credit. Traditional banks are so risk averse these days.”
Facing the possibility of layoffs or an inability to compete in the biodiesel market with old equipment, the Bronx, N.Y.-based company, which distributes biodiesel and collects waste cooking oil from 2,700 restaurants in the New York City area and cleans it up for sale as a biodiesel feedstock, managed to get a five-year $50,000 loan at a reasonable rate from Boc Capital. Boc is an intermediary lender through the SBA, which received $750,000 from the federal government thanks to the 2009 stimulus package. For Baker, the microloan was a solid option for his company to help finance upgrades to its oil rendering equipment, and hire more staff. “It helped us to increase our profitability,” Baker tells Biodiesel Magazine. “We’ve actually grown and hired people as a result.”
The article does point out that these microloans aren’t for everyone. Many operations would need much more than the $50,000 limit on the loans, and they shouldn’t be used as a primary source of credit to sustain operations.