Mi­croloans’ big help

Bay Area non­prof­its of­fer cash infusions to small firms

San Francisco Chronicle - Late Edition (Sunday) - - BUSINESS REPORT - By Carolyn Said

Money is cru­cial fer­til­izer for small busi­nesses, but many en­trepreneurs — es­pe­cially women, peo­ple of color and low­in­come groups — lack easy ac­cess to loans.

That’s par­tic­u­larly prob­lem­atic be­cause stud­ies show that most job cre­ation hap­pens at small en­ter­prises.

Two Bay Area non­prof­its, San Fran­cisco’s Work­ing So­lu­tions and San Jose’s Op­por­tu­nity Fund, seek to ad­dress this dilemma. Now both are ex­pand­ing their al­ready pro­lific lend­ing, seek­ing to reach ad­di­tional un­der­served en­trepreneurs through what the fi­nan­cial in­dus­try calls mi­crolend­ing — rel­a­tively small loans that have a so­cial as well as fi­nan­cial mis­sion.

Their loans have acted as catalysts for all kinds of busi­nesses, largely in the Bay Area: restau­rants and cafes; bou­tiques and other shops; florists and bak­eries; pur­vey­ors of cof­fee, desserts, baked goods, yo­gurt; bike shops and makeup sup­pli­ers.

Work­ing So­lu­tions and Op­por­tu­nity Fund re­cently saw their found­ing CEOs turn the reins over to women lead­ers. Work­ing So­lu­tions CEO Sara Razavi and Op­por­tu­nity Fund CEO Luz Ur­ru­tia both find mo­ti­va­tion from their own im­mi­grant ex­pe­ri­ences. And the two en­ter­prises col­lab­o­rate: Work­ing So­lu­tions fo­cuses more on early-stage star­tups while Op­por­tu­nity Fund han­dles com­pa­nies with more of a track record.

Work­ing So­lu­tions, which cel­e­brates its 20th an­niver­sary this year, plans to is­sue 1,000 mi­croloans and dis­burse $30 mil­lion — up from 700 loans and $18 mil­lion to date — by 2021 or sooner.

“Our model is to be the first to be­lieve in (en­trepreneurs) and al­low them to up their debt as their ca­pac­ity grows,”

“Our model is to be the first to be­lieve in (en­trepreneurs) and al­low them to up their debt as their ca­pac­ity grows. If the fire catches, they grow.”

Sara Razavi, CEO, Work­ing So­lu­tions

Razavi said. “If the fire catches, they grow.”

Loans av­er­age $26,000 and re­pay­ment is a ro­bust 96 per­cent. By con­trast, only about 82 per­cent of Small Busi­ness Ad­min­is­tra­tionbacked loans are re­paid, ac­cord­ing to a NerdWal­let study of loans awarded from 2006 through 2015. Razavi cred­its ex­ten­sive coach­ing and lots of one-onone sup­port for that high rate.

“It’s more of an in­ti­mate re­la­tion­ship than the big banks,” said Patty Ro­driguez, founder of SF Park­ing. She re­ceived a $25,000 loan from Work­ing So­lu­tions af­ter be­ing turned down by con­ven­tional banks shortly af­ter start­ing the com­pany in 2011. The money al­lowed her to buy rev­enue-re­port­ing equip­ment man­dated by San Fran­cisco.

“It made it pos­si­ble to con­tinue,” she said. “I don’t know if I’d still be op­er­at­ing with­out that loan. I was so new then that other lenders re­jected me.”

Her five-em­ployee com­pany man­ages the em­ployee park­ing lot at San Fran­cisco In­ter­na­tional Air­port. Over the years, she’s em­ployed an es­ti­mated 200 peo­ple, both part and full time (park­ing is a high-turnover busi­ness), with an em­pha­sis on of­fer­ing jobs to pre­vi­ously in­car­cer­ated peo­ple to help get them back on their feet.

Razavi said some of her ded­i­ca­tion stems from her own back­ground. Her fam­ily em­i­grated from Iran when she was 10. Her sin­gle mother, an ex­ec­u­tive back home, worked as an in­ter­preter and opened an Orange County book­store spe­cial­iz­ing in ti­tles from the Near East and In­dian sub­con­ti­nent.

“But she couldn’t quite find her foot­ing here,” Razavi said. “That’s why I got in­ter­ested in this kind of so­cial im­pact in­vest­ing.”

Luz Ur­ru­tia, CEO of Op­por­tu­nity Fund, like­wise was in­spired by per­sonal ex­pe­ri­ence.

Even though Ur­ru­tia’s first U.S. job was as a man­age­ment trainee at a bank, her own em­ployer turned her down for a credit card. As a new trans­plant from Venezuela, she lacked a credit his­tory.

“I sat there and thought, ‘One day I will build a fi­nan­cial ser­vices com­pany that pro­vides af­ford­able, re­spon­si­ble so­lu­tions for peo­ple who don’t have ac­cess to credit,’ ” Ur­ru­tia said. Af­ter years do­ing just that at for-profit banks, she joined Op­por­tu­nity Fund in 2017.

“Our mis­sion is to drive eco­nomic mo­bil­ity by pro­vid­ing af­ford­able cap­i­tal and re­spon­si­ble fi­nan­cial ser­vices to de­ter­mined en­trepreneurs and com­mu­ni­ties,” Ur­ru­tia said.

She de­scribes the 25-year-old or­ga­ni­za­tion as the coun­try’s largest non­profit mi­crolen­der. It makes 3,000 loans a year, sup­port­ing over 5,000 bor­row­ers at a time, with $152 mil­lion in its port­fo­lio un­der man­age­ment. About 85 per­cent of its busi­ness is in Cal­i­for­nia, heav­ily con­cen­trated in the Bay Area.

Now it’s try­ing to pro­vide $1.2 bil­lion to small busi­nesses by 2023 and to ex­pand both in Cal­i­for­nia and na­tion­wide. Be­sides its loans, Op­por­tu­nity Fund in­vests about $175 mil­lion in com­mer­cial real es­tate projects that ben­e­fit com­mu­ni­ties, such as build­ings for San Fran­cisco’s Com­pass Fam­ily Ser­vices for home­less and at-risk fam­i­lies, Oak­land’s Na­tive Amer­i­can Health Cen­ter and Berke­ley’s David Brower Cen­ter.

The en­trepreneurs’ re­pay­ment rate is 97 per­cent. An even more im­pres­sive statis­tic: Some 94 per­cent of the bor­row­ers’ en­ter­prises re­main in busi­ness two years af­ter first re­ceiv­ing a loan, twice the na­tional av­er­age for small busi­nesses.

“Th­ese are bor­row­ers who may not have tra­di­tional doc­u­men­ta­tion, or no credit or thin files,” Ur­ru­tia said. “No one’s lend­ing to them, they don’t have what tra­di­tional lenders need.”

Brenda Buen­vi­aje, for in­stance, had worked as a chef for years but lacked busi­ness ex­pe­ri­ence. When she wanted to open her own res­tau­rant in 2007, not just banks turned her down but “friends, co-work­ers, my own par­ents were like, ‘No thank you,’ ” she said. Op­por­tu­nity Fund said yes, tak­ing out a lien against her condo to se­cure the $100,000 loan.

“It felt mirac­u­lous, be­cause the fail­ure rates for restau­rants are so no­to­ri­ously high,” Buen­vi­aje said. She used the money, along with a small busi­ness loan, to buy and ren­o­vate a res­tau­rant on Polk Street that be­came Brenda’s French Soul Food.

Three years later, she’d re­paid the loan when the space next door be­came va­cant. She bor­rowed from Op­por­tu­nity Fund again to ex­pand, and then again in 2014 to open a third lo­ca­tion on Divisadero Street.

She and her wife run three San Fran­cisco restau­rants (Brenda’s French Soul Food, Brenda’s Meat & Three, and Libby Jane Cafe), which em­ploy about 100 peo­ple (up from four when she started), and are eye­ing a fourth spot in Oak­land’s Temescal district.

“It’s been an al­laround lovely ex­pe­ri­ence,” she said. Op­por­tu­nity Fund’s “mis­sion is to help small busi­nesses grow com­mu­ni­ties, and that’s ex­actly what they did.”

Ur­ru­tia said the mul­ti­plier ef­fect is a big part of the fund’s im­pact.

“Ev­ery loan we do cre­ates or sup­ports three jobs,” she said. “Ev­ery dol­lar we lend out cre­ates $2 of eco­nomic ac­tiv­ity through in­creased wages, spend­ing, tax rev­enues. The im­pact of th­ese small busi­ness loans is sig­nif­i­cant.”

Like Buen­vi­aje, Ana Poe lacked busi­ness ex­pe­ri­ence and also had no credit his­tory. While work­ing as a dog trainer, she fab­ri­cated a leather col­lar for her res­cue dog Paco. Cus­tomers asked for their own ver­sions and soon she had a brisk side gig. At a cer­tain point, she de­cided to turn it into a Berke­ley store with an on­line com­po­nent, but she needed cap­i­tal for tools and ma­chin­ery and to buy sup­plies in bulk. Op­por­tu­nity Fund started her out with a six-month, $1,000 loan to help build her credit,

then a $5,000 loan and then a $10,000 one. It worked with her on a re­pay­ment pro­gram it calls EasyPay. A por­tion of ev­ery store­front sale went to pay back the loan, in­stead of hav­ing a fixed monthly pay­ment. “If busi­ness is slow, you don’t get dinged for be­ing late,” she said. “It’s re­ally flex­i­ble, and it’s nice not to have to worry.”

In to­tal, she bor­rowed $65,000 from Op­por­tu­nity Fund, all of which she’s now paid back. Paco Col­lars grosses about $500,000 a year and em­ployes five peo­ple. Poe thinks she won’t need any more loans.

“Op­por­tu­nity Fund made us fi­nan­cially sta­ble,” she said.

Carolyn Said is a San Fran­cisco Chron­i­cle staff writer. Email: [email protected] sfchron­i­cle.com Twit­ter: @csaid

Pho­tos by Scott Straz­zante / The Chron­i­cle

Above: Ana Poe works on a leather dog col­lar at her Berke­ley busi­ness, Paco Col­lars. She bor­rowed $65,000 from Op­por­tu­nity Fund.

Top: Patty Ro­driguez, founder of SF Park­ing, which runs the em­ployee lot at San Fran­cisco In­ter­na­tional Air­port, chats with concierge Gil­bert Gal­le­gos. She re­ceived a $25,000 loan from Work­ing So­lu­tions af­ter be­ing turned down by con­ven­tional banks.

Pho­tos by Scott Straz­zante / The Chron­i­cle

Above: SF Park­ing’s Patty Ro­driguez got a loan from Work­ing So­lu­tions, which works with early star­tups.Left: Ana Poe (left), at her Paco Col­lars with Les­lie Sul­li­van, got loans from Op­por­tu­nity Fund, which fo­cuses on es­tab­lished busi­nesses.

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