Rutgers Made Microlender Gives Business Loans
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UPDATED: Oct 16, 2012
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A pair of Rutgers University students has made an online microlending organization.
Four years ago, the pair created The Intersect Fund, a microlending organization based in New Brunswick. In October of 2012, Intersect received $600,000 in federal and private funding. Intersect focuses on lending loans to small minority and women-owned businesses that are in under-served urban areas.
Since 2008, Intersect has lent 175 short-term business loans for a total combined value of over $300,000. Companies that have received Intersect’s business loans have ranged from hot dog vendors to hair salon operators. The Intersect Fund’s co-founder and executive director, Rohan Matthew, can now lend as much as $1 million in short-term business loans over the next two years.
Matthew believes lending this amount of money out could potentially lead to the creation of 300 jobs.
“I can tell you that most of the ideas concocted in a Rutgers dorm room are not good ideas. This one is different,” said Matthew at a news conference in Newark where the new funding was announced, according to the website NewJersey.com.
Intersect intends to expand from the Newark and News Brunswick region in addition to increasing its staff size.
The majority of the Intersect’s financing came from a $300,000 grant from the Community Development Financial Institutions Fund, a program from the U.S. Treasury.
An additional $200,000 in funding was obtained from Capital One Bank.
Matthew and his co-founder Joseph Shure developed their idea for Intersect after walking past shuttered storefronts in New Brunswick. While neither one has a background in finance, they both saw the clear need for financing options for interested borrowers in the inner city that do not have access to traditional funding.
Matthew describes his company’s business practice as more akin to “nano-lending” than microlending. They offer an average loan size of about $1,500. Once they obtain new funding they hope to be able to offer financing of up to $20,000.
These loans are short-term, lasting from 12 to 18 months, and they carry interest rates around 15 percent. While it is certainly higher than an average business loan from a bank, it is still less than the interest on a credit card.