Charging Interest on Loans – The Hartford

We do charge interest on our loans. This is
a business transaction and, you know, it’s not the reason behind it but there is something
really satisfying, I think, about being in a business transaction, operating Accion as
a business, and holding ourselves to the same standards that we hold our business owners.
It would be a kind of curious and ironic situation for us to accept that we operate a very sloppy
business but we demand a business owner have cash flow and good, and good financial records.
We charge interest to cover a portion of our costs. It’s really to address the issue that
these are, from the financial institution’s perspective, these are risky businesses. And
why are they risky? They’re risky because they’re young. They’re risky because they’re
small. They’re risky because of the nature of the business is one that a financial institution
has a hard time understanding. I mean, can you imagine a banker going into a home where
a woman is taking care of 6 or 7 children? She’s got a license, she’s got an insurance
policy to cover her activities, but how is a banker going to understand what the real
value of that business is? We’re in those homes all the time and it’s easy for us to
understand the nature of that business. Interest covers a little bit of that risk. It also
covers our cost of capital. We’re not in a—we’re not in a position where we have money to hand
out for free and for us to be able to recoup some of our costs means that this year is
5500 or so loans that will be made will be repaid so that we can address another 5500
businesses next year, hopefully 10,000 businesses and growing after that.

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