Micro loans, macro effects
North Fork Bancorp., whose nearly 20 downstate branches converted in March to the Capital One brand, closed out its history by becoming one of the 10 most focused lenders to small businesses, a recent federal report shows.
North Fork was acquired in 2006 by Capital One Financial Corp., itself the second largest provider of small-business loans in the nation. The McLean, Va.-based company trailed only New York City-based American Express Corp. in small-business lending among the 100 largest lenders in the U.S.
The Small Business Administration defines a small-business loan as any loan under $1 million, and a micro loan as $35,000 or less, although for an annual study it conducts it uses a $100,000 measure for the latter category. Credit card purchases are included in the data.
Micro loans are considered risky because of the limited business experience of many entrepreneurs who seek them, but are also regarded as a promising alternative for individuals to extricate themselves from dead-end jobs or public welfare. The Self-Employment Learning Project found that 49 percent of micro-loan recipients were still in business after five years, a slightly higher percentage than the average for all small businesses.
In a study of microfinance in upstate New York between 2000 and 2004, the Federal Reserve Bank of New York found that about half of loan recipients received funding to support existing businesses, including retail, professional services and personal services like child care.
On average, loan recipients paid an average interest rate of 8 percent over a term of at least four years, and many were allowed to place vehicles, tools or other equipment as collateral.
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