A Chattanooga credit union launched a novel program this month to lend to fledgling businesses that are working with local incubators.
Tennessee Valley Federal Credit Union ($1.2 billion in assets, 121,585 members) is offering new or early-stage businesses loans of $2,500 to $50,000. Unsecured loans can be made for 36 months and terms can be extended for secured loans, depending on the useful life of the collateral, said Tommy Nix, vice president of business and community services.
"Chattanooga has a very thriving entrepreneurial community," Nix said. "There was a fair number of businesses that didn't fit into the typical boxes for businesses needing money."
The businesses must be within the Tennessee Valley FCU's region and must be working with one of seven area small business organizations: The BrightBridge, Co.Lab, Launch Chattanooga, Score, Tennessee Small Business Development Center, Urban League of Greater Chattanooga or the Women's Business Center.
Nix, who joined Tennessee Valley FCU two years ago, worked previously at the Tennessee Small Business Development Center, which advises new businesses. The experience taught him the value of business mentorship.
Research from the U.S. Small Business Administration has shown that this type of vetting nearly doubles a businesses chance of success, Nix said. That, in turn, makes mentorship relationships a natural part of the loan requirements.
"The only access to these funds is through these groups," he said. "If we make a loan, they will be required to continue to work with the group."
Depending on how long the business has been in existence, it will need to provide a business plan, revenue projections and tax returns. The credit union can approve the loans within a few days.
The first loan to be awarded will be announced Oct. 4.
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