We've all been there: A member applies for a small loan. “Start-up money,” she says, “for a new business venture. Not much, I only need a few thousand.”
You look at the assets: Zip.
You request a business plan: Nada.
You consider the member’s experience: None.
Oddly, you realize, wannabe entrepreneurs in all their innocence still are more attractive than Congress.
What they do have is a twinkle in their eyes. At this moment in time, rationality isn’t part of their DNA. They have a dream, a vision.
As the saying goes, “Hope is not a strategy.” But, in many cases, it’s their only shot at the American Dream.
Often you have to tell these members—as much as it hurts you, and as much as you’d love to help them—that you have this thing called a loan “policy” which is reviewed by an “examiner.” You simply cannot gamble with your members’ money.
|James Collins is Credit Union Magazine's humor columnist.|
But wait. Before you sink their dreams faster than a submarine with a screen door, look at these five scenarios and guess which one actually went on to become a successful business:
- Two guys, looking like permanent residents on “Occupy Wall Street,” ask for a few thousand dollars to assemble 50 new devices to sell to a local store. With no cash, they present the purchase order as their only asset.
- A new manager at a local coffee bean supplier wants to transform the business from a wholesale operation to a retail restaurant.
- Local owners of a picture-framing business want to use scrap wood from the process to launch a new line of children’s doll houses.
- A 17-year-old wants a $1,000 loan to open a sandwich shop in an out-of-the way, deserted part of town.
- A husband and wife need $45,000 to open a small grocery store named “Safer Way.” To save on expenses, they plan to live in the store.
If you haven’t guessed, all of these startups succeeded:
- The two hippies in the first example were Steve Jobs and Steve Wozniak of Apple Computer, selling 50 Apple I computers to a local retailer.
- The coffee bean supplier was Howard Shultz, who insisted that his new company, Starbucks, begin serving hot coffee.
- The picture framers were Harold “Matt” Matson and Elliot Handler whose names were combined to form “Mattel.”
- The teenager started the Subway sandwich corporation, which today boasts more than 39,000 franchisees.
- The last example is the true story of the dawn of Whole Foods—a business that currently takes a disproportionate amount of my personal income.
On paper, none of these businesses would get a second look by most modern underwriters. Their ideas relied on inspiration, luck, and hope—none of which fit very well in today’s computerized underwriting engine.
Lending to these types of dreamers requires something better, and more tangible, than a high credit score. In fact, it calls for a totally different model to make it happen.
Some lenders are taking note. One example is a loan program launched by credit unions in British Columbia. The Remarkable Micro-Loan focuses on the entrepreneurial ideas of 18- to 29-year-olds. Check out the model at beremarkable.com.
While it will take time to determine the success of this venture, in the meantime, the campaign is littering the social media world with positive videos and stories regarding recipients.
If we truly believe the creativity, innovation, and tenacity of our membership is unparalleled, perhaps it’s time we invest our capital there.
In other words, perhaps it’s time to invest in the “strategy of hope.”
JAMES COLLINS is president/CEO at O Bee CU, Tumwater, Wash. Contact him at 360-943-0740.