Low-Cost Loans for Small Businesses Turned Down by Banks

It’s an old story: Bank lending to small businesses went away during the financial crisis and never came all the way back. Tighter lending standards created space for alternative lending models, most of which offer access to capital at sky-high interest rates. In other words, you can get a loan, and you can get it fast, but it’s going to cost an arm and a leg.

Roberto Barragan, chief executive officer of nonprofit lender Valley Economic Development Center, envisions a more affordable future for entrepreneurs seeking credit. On Dec. 9, VEDC launched a $20 million fund to lend to small businesses in New York, New Jersey, and Connecticut. The fund will make loans from $50,000 to $500,000, setting it apart from nonprofit microlenders that generally lend smaller amounts, says Barragan. Most borrowers will have previously been turned down by banks, and VEDC says it’s interest rates will probably average from 6 percent to 8 percent.