Feb. 09--EDITOR'S NOTE: This is the second of a three-part series on small business lending in Santa Cruz County. Today: A new lending source arrives.
WATSONVILLE -- When Silicon Valley venture capitalist Bud Colligan met with Jacob Martinez, who is working on a federally-funded computer center for teens in Watsonville, Colligan noticed a skateshop at 25 E. Beach St. and thought to himself, "It's so great a business like this is downtown."
He did not realize then that H Skate's owner had opened with the help of a $5,000 loan from the Opportunity Fund, a nonprofit based in San Jose that boosted lending locally specifically because of his support.
"I met all the requirements and got the money in 72 hours," said Emily Huante, 31, who needed cash to buy inventory for her shop's September opening. "All the stars aligned for me."
Since May, Opportunity Fund has made $744,000 in small business loans ranging from $2,500 to $100,000 to 44 entrepreneurs in Santa Cruz and Monterey counties, launching new ventures and providing less expensive capital to business owners that had relied on more costly merchant cash advances.
Caitlin McShane of Opportunity Fund said this initiative was spearheaded by Colligan, a member of fund's Leadership Council.
People who have worked with Colligan say he is a creative thinker with a rare talent for identifying business challenges and posing solutions.
He has a passion for community activism, in 1998 founding Pacific Community Ventures, an organization that made equity loans and pro bono advice to businesses in low-income communities throughout California.
He got involved in the Opportunity Fund after asking Eric Weaver, the chief executive officer, to be on the board of Pacific Community Ventures.
Since Colligan began spending more time in Santa Cruz than Palo Alto, he observed that unemployment was 24 percent in Watsonville and 19.6 percent in Salinas, much higher than countywide, yet getting little attention. He wondered why.
His conclusion: Small businesses need capital.
He envisioned loans for small-scale service businesses such as trucking, restaurants, cleaners, retailers, who could then hire employees, who would put more money into the local economy.
"Commercial banks don't like to do loans lower than $100,000," he said. "It's hard for them to make money on loans like this."
At end of 2012, he went to Weaver with a proposal, volunteering to bring the services of Opportunity Fund and Pacific Community Ventures to Santa Cruz and Monterey counties.
He felt Opportunity Fund had 20 years of expertise, making $2 million in microloans a month in California, with a loan loss ratio of 3 percent.
"A lot of people we bank are unbankable," Colligan said, explaining some have a FICO score of less than 600, are undocumented or have a foreclosure on their record. "We ascertain whether this person is good credit risk."
The Opportunity Fund's EasyPay loan, geared to restaurants with large upfront capital needs, allows a business owner to repay automatically as a percentage of daily debit and credit card sales. Annual interest rates range from 8.5 percent to 18 percent, costing less than many credit cards.
Devon McAlpine of Opportunity Fund's microlending manager, reviews loan applications. Kendra Ott, of Pacific Community Ventures, matches entrepreneurs with advisors.
Colligan works on getting the word out.
The initial success impressed the Packard Foundation and the Community Foundation of Monterey County, which have provided funding.
Colligan has met with the Community Foundation of Santa Cruz County to ask for support.
"There's no reason to recreate the wheel," he said.
"Opportunity Fund fills a void," said Sandi Eason, who heads Wells Fargo business banking in Santa Cruz and Monterey counties.
Colligan is beating the bushes for someone fluent in Spanish and English to join Opportunity Fund as a Santa Cruz/Monterey microfinance manager to generate qualified applications, analyze repayment ability and make loan recommendations.
"We can be an economy of entrepreneurs and creators," Colligan said, noting 80 percent of jobs come from small business and elected leaders can adopt policies that make it easier for that economy to exist. "No one is going to do it for us. We have to create it."
Follow Sentinel reporter Jondi Gumz at Twitter.com/jondigumz
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