Opinion

Small business loans in jeopardy

A man runs his bicycle-repair shop business with his laptop computer. (Photo: Mintimages, via Shutterstock).

Politicians often praise small business owners for their role in our economy and in our society– and rightly so. After all, small businesses employ nearly half of all Californians, provide vital goods and services, and help create vibrant communities. Right now, our representatives in Sacramento have an opportunity to demonstrate that belief by supporting legislation that will help small business owners across the state.

A little-known but essential state program called CalCAP, which helps small banks and Community Development Financial Institutions (CDFIs) make loans to small businesses, is in jeopardy of running out of funds. But Senate Bill 551, sponsored by state Sen. Ben Hueso, would give CalCAP new life and, having already passed the Senate, is working its way through the Assembly—starting with the committee on Jobs, Economic Development and the Economy (JEDE) on June 19.

We financed a pair of friends in San Diego to hire more workers when their window cleaning company landed Starbucks as a client.

For Opportunity Fund, the CDFI I lead, this bill is crucial to our ability to extend capital—the lifeblood of all businesses—to entrepreneurs across the state. Since 1994, Opportunity Fund has supported 8,000 California small business owners with $300 million in loans, virtually all of which have been backed by the CalCAP program. When you look across the state, in every district, you can see the impact this program has in adding to the vibrancy and vitality of our small businesses. Lawmakers serving on the JEDE Committee will soon have the ability to vote on whether this bill moves forward. I hope they each recognize how vital this program is to entrepreneurs across the Golden State.

Entrepreneurs like Allen Garcia, owner of A’s Watchland in Buena Park. Last year, Garcia had to renovate his Watchland kiosk in the Buena Park Downtown mall — an unexpected expense. Without a loan, he would have had to lay off employees and was even worried about paying his mortgage. Fortunately, he found Opportunity Fund, which gave him a modest loan. Crisis averted. And all with the help of CalCAP.

This is not an unusual story. We helped the owner of a barbecue joint in Modesto buy a food truck, bottle his award-winning barbecue sauce and hire an employee. We financed a pair of friends in San Diego to hire more workers when their window cleaning company landed Starbucks as a client. And we helped a woman in Hayward grow her tamale business from a door-to-door operation to a 6,000-square-foot factory putting out 20,000 tamales a month.

Our research shows that each dollar we lend leads to $2 in annual economic activity, and each loan has helped an entrepreneur support an average of three jobs. And wespecialize in serving low-income, underserved and otherwise disadvantaged communities: 89 percent of our borrowers are minorities, 70 percent are low to moderate income and 30 percent are women.

While the businesses we serve are creditworthy, they don’t meet all the requirements typically desired by traditional lenders. Opportunity Fund, and other lenders, contribute a small portion of each loan we fund and CalCAP provides a match to help us build a loan loss reserve to lessen that risk. The return on that investment is enormous. Every dollar CalCAP contributes to Opportunity Fund yields as much as $30 in loans to underserved California businesses.

Senate Bill 551 will help preserve and extend the remaining funds in CalCAP and help small business owners in California do what they do best—create jobs, provide services and invigorate their communities.

By backing SB 551, our state leaders can do more than make political promises to business owners—they can help them now.

Ed’s Note: Luz Urrutia is the CEO of Opportunity Fund, a leading Community Development Financial Institution with the largest non-profit portfolio of small business loans under management in the nation.


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