Sue Malone –Community Express Loans

Sue Malone talks about how almost any entrepreneur can get an SBA-backed $25K loan within one week after filling out a one page form.

So what kind of loans do you make?

I do from $5K to $25K loans. Simple. No collateral. No business plan. I fund companies who need just about anything -- build a beta unit, file a patent, or even pay payroll.

What do you charge for that loan?

It’s prime interest rate plus 4.5%. It’s uncollateralized. I do artists. I do things to give people a chance. I come to Austin twice a year to give a seminar on it.

What’s it called?

The Community Express Loan. It comes from the SBA. It’s a pilot program. I fight tooth and nail to keep it alive. We’re an SBA-licensed lender. They launched 13 of them back in the 1970s. We bought our license from Transamerica and put in $55M to back it.

Why do they want to kill it?

People in Washington don’t think we need it. They want to go back to funding the strip mall shopping centers at $350K loans that are collateralized. The Community Express Loan is a one –page application that can get approval in about a week.

Do you have any success stories here in Austin?

Yes. In Austin, I’ve done a dessert place, two women who have a marketing group here, an author, an artist, a mortgage broker, and a lot of restaurants. A nightclub called Blubbers and there’s more.

What is the default rate?

3%. It’s like microfinance.

How did you arrive at 4.5% + prime as your interest rate?

The US law allows us to go up to 7%. We could charge more but it’s all about cash flow.

How long do they have to pay you back?

Ten years.

What deals can you not fund?

Gambling, narcotics, sex and non-profits. I see a lot of that.

Is that a charter in your organization that says that?

I have an SBA license and the SBA statutes set that criteria.

Are you an SBIC?

No. SBIC’s were a good idea. Those were set up during the first Bush administration and they were trying to spread the risk. The pension funds that invested in them were not at risk because the SBA came in with a cash match. Before the dotcom bust you could get a 3x to 4x the cash match. But where they lost it was they put a cap on the profits at 10%. It really distorted the returns because the positive returns couldn’t make up for the losses. The SBA got out of it because they lost too much money since they capped it.

How did you get into doing this?

I went to the SBA and I said you’re not doing anything for small businesses. They pointed me to their microloan program. I looked into it and found they had done seven loans.

Why so few?

No one could meet the requirements. I said something has got to change. So I started this program. Just about anyone can come to me.

Do you look at their credit score?

We don’t look at their FICA or Beacon score. We only look at how they pay back their current loans. If they have a few missed payments that is okay.

Where can one get more information about the program?

You can find the loan application
here, and the web site provides the forms and instructions for completion.

Best regards,
Hall T.