SANTA CRUZ — Small local businesses have new resources for cash and business mentorship, thanks to a new push into the Santa Cruz and Monterey area by two microloan and business advisory organizations.
“We’re really going after it,” said Bud Colligan, a Silicon Valley venture capital and private equity investor who co-founded Pacific Community Ventures and serves on the Leadership Council of Opportunity Fund. Colligan, a longtime Santa Cruz resident, said the organizations have been eyeing the area for development assistance because of high unemployment, especially in Watsonville and Salinas.
“There is a strong sense of entrepreneurship all along the Central Coast, but our small business owners need support in order to help grow our region’s economy and create local jobs,” Colligan said. “By providing that critical support, we can make huge strides towards putting people to work and empowering our local economy.”
Goal of 100 loans
The Opportunity Fund, which is the oldest and largest micro lender in the state, aims to provide about 100 microloans in the area in the next two years, Colligan said. Since its first loan in 1995, the organization has deployed $280 million into low-income communities. The average Opportunity Fund loan size is about $7,500, but can be as much as $100,000. Recipients run a locally based business that is tied to a local economy.
“We have every kind of business owner,” said Caitlin McShane, marketing and communications director for Opportunity Fund. The majority of loan recipients are low income entrepreneurs, women and ethnic minorities. “All those categories are folks that have the most difficult time accessing our capital markets.”
Pacific Community Ventures, a 15-year-old organization that has focused on mentorship relationships with brick-and-mortar small businesses, is aiming to match 100 entrepreneurs with advisers in the next couple years as well as provide a smaller number of larger microloans.
“Our goal in Santa Cruz and Monterey counties is to work with as many small and non technical businesses as we can to help them make more jobs,” said Allison Kelly, chief operating officer of PCV. Kelly compares the organization to Doctors Without Borders, the French-based organization that sends medical teams into places of great need to provide care.
“We are business people within borders; we help bring business people to entrepreneurs in need,” Kelly said. “Many (people) have gone into business doing what they love but everybody isn’t as well-versed in every aspect of business.”
In recent months, several businesses in the area have received funds, including a café owner, a tuxedo shop and a flea market-based business.
Helping businesses grow
A $10,000 loan to Scholastic Expeditions in Scotts Valley is going to help founding owner Susan Schai grow her business faster.
“It gives me more freedom,” said Schai who develops science-based research excursions for middle school and high school age students. “As the company has grown, I’ve had less and less time to reach out to teachers and sell the program.” Schai, who employs three part-time people in the U.S. as well as a few part-time workers in Costa Rica, plans to have three full-time sales people in the next two years. “My company would have been far more successful faster if I had access to capital earlier on.”
Hugo Mondragon, a Watsonville resident who is owner/operator of HMB Trucking, delivers fish from the coast to inland communities. He received a $5,500 Opportunity Fund loan to buy a better, larger refrigerated trailer.
Pacific Community Ventures matched Christie Araujo, founder of Idylwild Designs, a home-based clothing design business in Watsonville, with Marco Iannucci, a San Francisco based business management consultant. Iannucci is helping her with cash flow and operational challenges.
Interest rates range from about 12 percent for the smallest loans to about 8 percent for the larger loans. Businesses usually have between one year and seven years to repay the loan with no penalty for early payment. The default rate hovers near 2 percent.
“We’re not looking to make the money back as quickly as possible, but to benefit the business and invest it, in doing something good with it,” McShane said. Each loan keeps or creates three jobs on average, she said. “It makes you realize that once you figure out how to work with very small businesses in the community, it can be a winning approach that you can certainly bank on.”
Read the original story about microloans here.