Loan program is creating jobs and helping those who are starting businesses

Loan program is creating jobs and helping those who are starting businesses

At least one business is doing well in the face of a sputtering economy.

Elizabeth Schott, the executive director of Accion San Diego, reports business has increased 70 percent over the first half of 2012, when compared to the first six months of last year. Accion is a nonprofit micro lender supported by government, corporate, foundation, and individual grants. Because it’s a nonprofit whose mission is to increase income and job stability through self employment, it’s able to take on much riskier loans than traditional lending institutions.

Schott says high unemployment has encouraged many people to start their own businesses, but tightened bank lending standards have left many people struggling to secure loans. That has positioned Accion as a much sought-after provider.

Thomas Nguyen, owner of Deluxe Auto Body in City Heights, says he was unable to secure funding from local banks because of his past credit history. He needed cash to hire two new employees to help him fill a Navy contract to repair military owned vehicles. He was referred to Accion San Diego by the government operated United States Small Business Administration and was able to borrow more than $20,000, which he will repay over four years.

“For people like me, Accion is the best solution,” says Nguyen.

Schott says internal data shows that about two and a half jobs are created or saved with each Accion loan. The nonprofit currently services 400 loans in San Diego County but only about 15 are from City Heights. That’s something they hope to change in the near future.

As a micro lender, Accion will make loans for as little as $300 and up to a maximum of $35,000. Payback periods can last up to five years.

Accion’s services are not for everyone, however. Schott says she encourages business owners to seek and accept traditional funding if it’s available. Accion charges a higher interest rate, currently between 12 and 18 percent, because of the additional default risk.

What makes a loan high risk? According to Schott, Accion will take on clients who have no credit history or past credit challenges, have low cash flow, don’t have collateral, and/or are just starting in business.

One such client was City Heights resident Isha Webb. She wanted to start her own clothing business and took out a $2,000 Accion loan to purchase a sewing machine and materials. She found so much success selling swimsuits that she took out a second, $2,000 loan to expand her business into bridal wear. Over the past five years she’s taken out four loans from Accion to help her purchase materials to support her business.

“Accion has allowed me to grow my business,” says Webb. She says she will soon be able to qualify for a standard bank loan and is thinking about opening a storefront.

Another unique service Accion provides its clients is help. It refers new business owners to organizations that can help write business plans, develop marketing materials, and give advice. Loan officers make regular contacts, checking on progress and offering additional services. Schott says all the added attention has resulted in a loan default rate of less than 7%.

Accion regularly hosts lending workshops at the City Heights Center, 4305 University Ave. To learn more about future workshops visit their website at www.accionsandiego.org or call 619-795-7250.