But there has been a snag in implementation—collateral. With an individually owned business, a small business owner will often pledge his or her home as collateral to secure a loan. But what if you have 100 owners? Are they supposed to pledge 100 homes? And what if they aren’t all homeowners? Enter a workaround from Berkeley, California, that may spawn many imitators. Berkeley is one of more than 520 communities with a revolving loan fund supported by the US Commerce Department’s Economic Development Administration (EDA). As Oscar Perry Abello writes in Next City, “Collectively, these loan funds represent more than $824 million in loans or cash available for loans.” Since 1975, such funds have made more than 37,500 loans to small businesses, totaling over $3 billion, which has helped leverage $16 billion in other funding sources.
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