Startup companies and entrepreneurs often have substantial difficulty raising initial capital. Personal resources and friend and family funds are often limited, and most of these companies and entrepreneurs do not yet have realistic access to traditional bank financing or equity financing through venture capital, private equity or angel investors. The Florida Microfinance Act (Florida Statutes Sections 288.993 to 288.9937) was enacted in 2014 to help to address these financing difficulties and to provide small businesses and entrepreneurs access to certain financing options.
On April 2, 2015, designated loan administrators began accepting applications for participation in the Florida Microfinance Act program.
The program should be valuable to certain small businesses and entrepreneurs in Florida because it provides them with a much-needed potential source of capital at a critical stage in their development. This may be especially helpful in certain industries where technology has substantially reduced the amount of capital required to start a business.
There are two components of the microfinance program: a loan program where qualifying small businesses and entrepreneurs can get a loan of up to $50,000; and a loan guarantee program (administered by Enterprise Florida) under which qualifying participants can obtain a loan guarantee in connection with loans from $50,000 to $250,000. The program is administered by the Florida Department of Economic Opportunity.
Who is eligible? Small businesses or entrepreneurs located in Florida who have no more than 25 employees and annual revenues of up to $1.5 million. Borrowers who seek loans under the program must participate in business training and technical assistance provided by the Florida Small Business Development Network.
Proceeds from a loan under the program must be used for startup costs, working capital, or to purchase materials, supplies, furniture, fixtures and equipment. Repayment must be personally guaranteed, and borrowers must provide information regarding job creation and other financial data to the loan administrator. A borrower may receive a maximum of $75,000 in total loans each year, and may receive a maximum of two loans each year and five loans over a three-year period. The program is designed to help small businesses and entrepreneurs gain access to subsequent private financing.
Image courtesy of Stuart Miles via FreeDigitalPhotos.net.
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