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Faced with the failure of financing, opt for microcredit

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The MicroEntreprendre network brings together 20 organisations. Over the past 22 years, they have granted 4,373 loans for a total of $23 million to more than 33,000 entrepreneurs. (Photo: 123RF)

FUNDING. Entrepreneurs excluded from traditional financial services can turn to microcredit to start their project. More than 33,000 Quebec entrepreneurs have done so over the past 20 years.

Karina Minner and her spouse John-Kevin Morin were working together in a transportation firm when they had the idea of ​​starting their own mobile mechanic business for heavy vehicles. At the time, neither had funds or assets to pledge. The banks refused to lend them money.

It was during an entrepreneurship fair that they met Danielle Roy, who worked for the Community Fund for Access to Microcredit (now MicroEntreprendre Basses-Laurentides). “She took the time to listen to us, believed in us and offered us very important support in our efforts”.

MicroEntreprendre lent them $5,000. This enabled them to secure further financing from a young entrepreneur fund and the BDC. “We founded JKM Mécanique mobile in 2012 and in three years we have gone from one to three mobile units,” emphasizes Karina Minner.

Today, the company posts a turnover of 4 million dollars, employs 25 people and is in growth mode by acquisition. The two entrepreneurs also created a trailer rental company. Karine Minner still finds the time to sit on the board of directors of MicroEntreprendre Basses-Laurentides. “Without them, none of this would have been possible,” she admits.

A path to financial independence

“Microcredit is part of the broader current of microfinance, which offers financial services to populations excluded from the traditional banking system”, explains Jean-Pierre Gueyie, professor of finance at the University of Quebec in Montreal. Microcredit remains the best-known manifestation of this.

The formula is relatively simple: an organization allocates loans of small amounts to applicants who do not have the guarantees usually required by lenders. In Quebec, the maximum offered is $20,000.

This approach generates very positive effects, according to the professor. “These loans allow people to integrate financial circuits and achieve their autonomy,” he underlines. They constitute a means of promoting entrepreneurship, in particular female. »

An “impact investment”

The MicroEntreprendre network brings together 20 organisations. Over the past 22 years, they have granted 4,373 loans for a total of $23 million to more than 33,000 entrepreneurs. This created and maintained 13,914 jobs. Above all, these organizations provided nearly 700,000 hours of support and training.

“We help the people we fund develop their entrepreneurial skills so that they can succeed in their project,” says Mona Beaulieu, Executive Director of MicroEntreprendre Basses-Laurentides. As for the money itself, it can be used as working capital, or to buy equipment, advertise, create a website, etc. A microcredit loan can also become a lever to seek funding from another source.

Files are assessed on their viability. Organizations therefore help applicants to write a realistic business plan, before it is presented to a committee responsible for granting or refusing the loan. The money lent comes from the community. “These are foundations, unions or companies that make an impact investment in order to fight poverty and social exclusion”, indicates the Director General.

Loans of honor

Microcredit should not be confused with a donation. “The interest rate can go up to 8.5%, explains the general manager of Microcredit Montreal, Indu Krishnamurthy. This is used in particular to reimburse our investors and to create a reserve fund that we use when a borrower cannot reimburse us. »

The network’s average reimbursement rate was 79% in 2021-2022. “These are loans on honor, so we must first establish a relationship of trust with the applicants, continues the general manager. We are targeting people who present viable projects, but above all who are open to advice and the possibility of modifying aspects of their project. »

Microcredit Montreal also lends to immigrant professionals who must take courses or pass exams to obtain the right to work in Quebec. The organization also has an assistance and training component specifically intended for women entrepreneurs. Women represented 70% of people supported by the organization in 2021-2022.

“I strongly believe in microcredit, in which I have been working for more than 20 years, because I see the impact of this democratization of capital on people and on the community,” says Mona Beaulieu, of MicroEntreprendre Basses-Laurentides.

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