Sweren speaks on micro loans

Josh Sweren ’08 is the former chief strategy officer of Elmseed, a nonprofit organization run by Yale students that provides micro loans to New Haven entrepreneurs. Elmseed has provided around $50,000 worth of loans since its founding in 2001. Sweren spoke to the News about Elmseed and entrepreneurship in New Haven.

Q: What are micro loans?

A: We give traditional loans like you’d get from a bank, except much smaller in scale. So the first loan we give to an entrepreneur is $1,500. Once they repay that $1,500 loan successfully, they’re eligible for a $3,000 loan. If they repay that $3,000 loan successfully, they’re eligible for a $6,000 loan. After a repayment of the $6,000 loan, they’re eligible for a $12,000 loan (though the $12,000 loan has different terms).

Q: What methods do you use to lend money?

A: We’re modeled after the Grameen Bank in Bangladesh founded by Muhammad Yunus. It’s a system of giving loans to people in a group structure. The idea is to implement an idea of peer pressure to help with our repayment rates. It encourages everyone to pay back their loan on time. It also encourages everyone to be critical of others’ businesses because no one wants one business to fail, because then there would be less money to borrow.

Q: How effective has Elmseed been?

A: I think on a small scale, it has been helping individual entrepreneurs achieve their dreams of starting a successful business. From a macro perspective, it has helped more people become employed [and has] raised awareness of micro-credit in New Haven. Also, we’re helping other schools in the U.S. begin their own micro-credit programs.

Q: What is your repayment rate?

A: It’s around 90 percent.

Q: How do you support clients in danger of defaulting?

A: The nature of the program is to help clients create successful business, so we’ll work with a client to fix whatever is wrong with the business and get them back on track. We try our best to ensure the success of our clients and work through any difficulties.

Q: How is Elmseed appealing to small business and future small business owners?

A: Elmseed is unique among credit organizations in that we don’t require credit checks, so in that sense, if someone has bad credit experiences and finds themselves unable to take out a loan from a traditional source, we’ll give them a fresh look and evaluate them solely on their entrepreneurial drive and willingness to work in a group setting. We also have a consulting branch that helps entrepreneurs.

Q: Is Elm Seed growing?

A: Absolutely. Part of our plan is to grow in scale sensibly and continue to draw in new clients and raise more money to give to new clients. A few years ago, we created a development department that has been working to get grants from larger foundations in order to help grow Elmseed’s capital base so we can give out more loans.

Q: Why does Elmseed give loans to those who might otherwise be rejected by traditional banks?

A: There are multiple reasons why someone might be rejected by a bank, such as a family tragedy that forced them to be unable to pay their credit debt. They have a perfectly sound business plan and are really hungry to become successful. A bank is not going to spend as much time trying to understand the person. We try to get to know each potential client very well and decide whether someone would thrive in our program.

Q: How does someone go about getting a loan from Elmseed?

A: Twice a year, we have training sessions where we’ll train new groups of clients. And then out of those sessions, we form groups that meet in centers every two weeks. At the centers, if a client is interested, they’ll make a loan presentation to the group. If the group approves, then Elmseed will approve the loan. Then the loan is dispersed to the client.

Q: What type of businesses have been started or expanded as a result of Elmseed contributions?

A: We have had hot-dog carts, like you’ll see around New Haven, especially. The ones around the Green are owned by an Elmseed client who got a loan from Elmseed around six years ago. [We’ve also had] a clown, construction businesses, caterers, clothing designers and event planners.

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