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How we’re getting more affordable business capital to underinvested San Diego areas and why that matters

July 10, 2018 | Small Business Loans
How we’re getting more affordable business capital to underinvested San Diego areas and why that matters, CDC Small Business

The following first-person account on the new access-to-capital partnership with the city of San Diego is from Robert Villarreal. He is executive vice president of CDC Small Business Finance, a business-lending nonprofit recently named SBA’s 2018 Jody C. Raskind microlender of the year. Villarreal is also the president of the Small Business Finance Fund, a CDC affiliate CDFI.

(Pictured above: Rodnia Attiq is the owner of El Borrego Restaurant in City Heights, a low- to moderate-income neighborhood in San Diego and one of the focus areas of the city capital partnership. Separately, we helped Attiq obtain an SBA microloan.)

How we’re getting more affordable business capital to underinvested San Diego areas and why that matters, CDC Small Business

Robert Villarreal

My career-long commitment to getting affordable, responsible loans to business owners who are historically overlooked ties back to my father — an immigrant who navigated the risky waters of entrepreneurship without formal help.

In 1949, he left his hometown of Nayarit, a small state in western Mexico, to come to San Diego as an 18-year-old undocumented worker. He toiled late nights and weekends for years in the notoriously demanding restaurant business to provide for our family.

By the 1960s, after working his way up in the industry, he and my mother became one of the first franchisees of homegrown fast-food chain Jack in the Box. They later owned and operated a successful parking lot near the San Diego-Tijuana border.   

Beating the odds, my father accomplished these feats without a high school degree or a single business loan. Still, I’ve often wondered what more my parents could have accomplished if only they had access to a robust support system, similar to the ones we at CDC Small Business Finance are creating for historically underserved communities.

Delivering low-cost business loans to areas that need it most

My father’s personal story is mainly why I’m a staunch believer in educating business owners during any lending process to ensure they only take on loans that fuel sustainable growth. This service has become more important than ever. Immigrant and minority business owners are increasingly falling victim to online-only companies that charge clients as much as 100 percent in annual interest for business capital.

This summer, CDC Small Business Finance continued to expand its community capital services through a unique partnership with city of San Diego officials. Together, we are offering business loans capped at 5 percent with flexible, transparent terms to business owners in four high-potential, historically underinvested neighborhoods. They are: City Heights, Logan Heights, San Ysidro, and the Diamond District, which includes Oak Park, Mount Hope, North and South Encanto, among other areas.

Dubbed the San Diego Collaborative, the program allows small business owners in those communities to get loans between $50,000 and $300,000. We will consider entrepreneurs of any size or stage as long as you are a licensed business owner. If you’re an existing business, we’ll just need to review your financials. Startups will need to provide a strong business plan. There is no minimum credit score to qualify for a loan.

Related: CDC named SBA’s 2018 Jody C. Raskind microlender of the year

What makes this new capital program unique

Through this collaborative, we are:

  • Leveraging a public-private partnership: We have received from the city a $300,000 community-development grant to deliver business coaching to potential program clients. This includes financial literacy, credit education and other support to help borrowers become loan ready. At CDC, we are longtime advocates of educating our borrowers before, during and after the loan process to increase the odds of long-term success.
  • Matching dollar for dollar: Through the partnership, San Diego city officials have promised a 1:1 match on capital issued, up to $1 million. For instance, if a $100,000 loan is issued, half of the financing will come from the city and the remainder will come from private capital raised by CDC.
  • Concentrating efforts in specific neighborhoods: Rather than deploying business loans throughout an entire city or county or region, we are focusing our efforts on a limited number of communities that need the support. This precise strategy will allow us to see the impact of the loans first-hand. We’re able to do this, largely thanks to our partnerships with the San Ysidro Chamber of Commerce, City Heights CDC, Logan Heights CDC, and the Diamond BID.
  • Creating jobs within target areas: We are encouraging all loan recipients to prioritize hiring those who reside in the neighborhoods where they’ve set up shop. That way, the impact of the financing is amplified. Borrowers have access to the San Diego Workforce Partnership, which can help them with recruiting. The ideal target: 51 percent of the jobs created should go to individuals who live in low- to moderate-income areas.

Why this business capital program matters

The neighborhoods we have chosen to focus on through this pilot initiative have long been overlooked for one reason or another. CDC and our partners can clearly see and feel the exciting potential in these areas. And we believe the flow of low-interest capital paired with customized business coaching can deliver the boost these areas have needed for a long time. If a business succeeds, their success positively impacts their workers and those who live within that community.

The delivery of responsible financing to such areas is needed more than ever. Immigrants and minorities have historically been the targets of predatory lending. And unfortunately, we’ve seen the harmful effects of such lending with some of the small business borrowers we’ve helped.

Related: How we’re closing the financing gap for LMI small businesses

About half of the client we’ve served through CDC’s Small Business Finance Fund, our CDFI, have taken out high-interest loans available only online. In one case, one business owner agreed to a $31,000 online-only loan to be paid out over 10 years. Had they continued on that schedule, they would have paid more than $90,000 in interest, or three times the loan amount.

We are hopeful that the partnership we’ve forged with the city of San Diego can help address this growing issue and promote more fair, responsible lending and business education to historically overlooked communities and business owners.

This Program is funded in whole or in part with Community Development Block Grant program funds provided by the U.S. Department of Housing and Urban Development to the City of San Diego.

Are you a small business in City Heights, Logan Heights, San Ysidro and the Diamond District — and looking for affordable capital? Learn more about CDC Small Business Finance’s partnership with these four communities in the city of San Diego.

Let’s talk! Reach us at loaninfo@cdcloans.com or (619) 243-8667.

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