Chattanooga's biggest credit union is banking on those working to build the city's entrepreneurial community to prepare new businesses for success even in a startup world where many businesses fail to succeed.
The Tennessee Valley Federal Credit Union (TVFCU) is launching a new loan program for early-stage and startup businesses that are recommended for loans from local business accelerator, incubator and mentoring programs.
"Our community from an entrepreneurial perspective is really booming, and we see a lot of small and emerging businesses that have a need for capital," said TVFCU President Todd Fortner. "In the traditional banking world, there is not a loan product for these type of businesses. But we are a community credit union and we think we have a product that will allow businesses that are showing early success a way to get at least some borrowed money without necessarily having to give up equity in their company for venture capital."
The new program, known as Idea Leap, will provide loans from $2,500 up to $50,000 for new businesses that would typically be unable to get such loans without traditional collateral or years of business records. TVFCU is relying upon seven startup assistance programs and businesses the credit union calls collaborators - BrightBridge, the Company Lab, Launch Chattanooga, the Service Corps of Retired Executives, the Tennessee Small Business Development Center, the Urban League of Greater Chattanooga and the Women's Business Center. Those businesses and organizations will help screen and mentor small businesses and will refer successful candidates for the loans to TVFCU.
"We think they have about an 80 percent better opportunity to succeed when they're with these collaborators who have shown success in working with a variety of businesses," Fortner said. "We think there is a real need for these type of loans and we know if this is good for the community it will be good for our credit union."
Businesses who get one of the new Idea Leap loans must continue to receive assistance from one of the collaborators during the life of the loan, and not all businesses that graduate from the accelerator and incubator programs will necessarily be approved.
But Tommy Nix, a former manager at the Tennessee Small Business Development Center who is now vice president of business services and heading up the new loan program, said the credit union wants to be more flexible and creative than banks with the startup firms.
"Where business lending usually requires two or three years of business performance, we're going to try to get outside that box," Nix said.
TVFCU hasn't set a specific interest rate for the new product, but the borrowing rates will be only a fraction of the 18 to 20 percent charges on credit card loans that many startup businesses use to pay some of their initial expenses. The credit union has pledged to try to make a decision for loan applicants within a day or two.
Monty Bruell, an entrepreneur and marketing strategist who advises and writes about numerous startup companies, said the TVFCU loan program will help fill a void for some businesses that need some extra capital to grow their businesses but aren't ready or positioned yet for venture capital or outside investments.
"There's definitely a need for this type of loan option," Bruell said after being briefed on the new product last month.
Nix said he developed the concept for Idea Leap when he was at the Business Development Center trying to create a community loan fund for qualified startups. Nix joined TVFCU last December and helped develop the new product, which the credit union is kicking off this week in conjunction with Chattanooga's Startup Week.
TVFCU, one of the biggest credit unions in Tennessee with more than $1.1 billion in assets, has expanded its business and commercial lending as its membership has grown to more than 122,000 people.
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.