Nonprofit works to fill small-business loan portfolio
June 16, 2014
Microlending — the segment of business banking that provides loans to the tiniest of business — is getting on its feet in northern Nevada.
After more than a year of work to iron out wrinkles, the Nevada Microenterprise Initiative is back in business in Reno.
But the nonprofit, which struggled as a small stand-alone organization, now is owned by Valley Economic Development Center, a Southern California nonprofit that's the largest business development corporation in the Los Angeles region.
VEDC, which is operating under the Nevada Microenterprise Initiative brand in northern Nevada, has opened an office at Reno's City Hall.
The organization looks to make $3 million in loans to small businesses in the Reno area this year, and it's especially looking to make loans to companies that create employment.
Chris Fream, a Reno-based staffer for VEDC, is focused on filling a pipeline with loan applications. The organization provides business loans as small as $5,000 and as large as $250,000 for startup and existing businesses.
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Its focus is firms that aren't yet able to qualify for traditional bank financing — for example, the tiny contracting firm that needs to borrow enough for equipment to get started in business.
It also emphasizes lending to women and minority-owned business as well as firms located in low-income or moderate-income neighborhoods.
Says Nancy Brown, an executive with Charles Schwab Bank and a longtime member of the board of Nevada Microenterprise Initiative, "The goal is to get the dollars out there. What these not-quite-bankable businesses need is a source of capital."
Nevada Microenterprise Initiative supports its borrowers with seminars, an eight-class series for entrepreneurs and other specific training programs.
Microlending is relatively costly. The overhead involved with administering a microloan of a few thousand dollars aren't much less than administering a loan of a million dollars, and the classes for borrowers add further costs.
Even when times were flush in the mid-2000s, Nevada Microenterprise Initiative struggled with the overhead. The recession that began in 2008 nearly killed the nonprofit lender, and it pulled out of the Reno market.
Funds provided through the state government kept the lender alive during the darkest days.
Mendy Elliott, a Reno-based lobbyist and former bank executive, worked with Gov. Brian Sandoval to find the best use for $13.8 million in federal dollars provided to the State Small Business Credit Initiative.
"The state didn't have the capacity to set up a lending program," Elliott says. "Besides, why would they?"
Instead, the state provided a portion of the funds to Nevada Microenterprise Initiative, which was required to come up with matching dollars.
That funding sufficiently strengthened the microenterprise lender that VEDC was willing to take on the merger in late 2012.
Meanwhile, the City of Reno was looking for ways to effectively use another federal grant to create jobs. It struck a deal to provide office space to the microenterprise initiative. More critically, it provided federal funds that VEDC could use as a loan-loss reserve on $2 million in fresh lending.
"The City of Reno was particularly enlightened about the idea of leverage," says Roberto Barragan, president of VEDC. "And they understood the need for us to have a location there."
Wells Fargo Bank provided further help with a $250,000 grant to be used by VEDC for capital for loans to low- and moderate-income business borrowers.
Since it began operations in the state through Nevada Microenterprise Initiative in early 2013, VEDC has made nearly $450,000 in microenterprise and small-business loans to 23 borrowers in southern Nevada.
Along with its new office in Reno, VEDC also operates in Los Angeles, the New York City area, Chicago, San Francisco, Las Vegas and Salt Lake City. It was launched 37 years ago as a program to revitalized downtown Van Nuys, Calif.