"It's still not easy to get a loan, but it's better than it used to be, even a year ago," said
VEDC is a nonprofit community lender with headquarters in the
Much of its funding is from banks that provide loan capital to satisfy the legal mandate of the Community Reinvestment Act. That's a federal law that requires financial institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods.
"I can get here from my home (in the
Founded in 1976, VEDC is a direct lender, not a broker. It offers a variety of microloan programs up to
In the last four years, the lender's assets have grown from
VEDC grew during the recession by making loans that traditional banks wouldn't. Among other things, the company accepts unconventional collateral, such as cars, trucks, restaurant equipment and liquor licenses.
The lender's default rate is less than 1.5 percent because it does extensive due diligence, Barragan said.
"If we don't believe in the owner and the model, we don't make the loan," he said.
It's also helped that there's not much competition for loans of less than
Just as there are pay day lenders that charge obscene interest rates for consumer loans, there are predatory lenders that prey on small business owners.
"They're the only ones aggressively going after this market," Barragan said. "I keep waiting for someone else to take a bite out of it, but there just doesn't seem to be much interest."
VEDC's interest rates typically range from 8 percent to 11 percent, depending on the size of the loan and the borrower's credit, Barragan said.
Most of its lending is to existing businesses, but VEDC will consider start-ups whose founders have invested their own money in a venture to show that they're serious.
"We're very pleased that they've decided to extend into our jurisdiction," said Director
Commercial lending in general took a hit during the recession, when loose underwriting came back to bite many banks and credit unions.
Some lenders were forced to bulk up reserves against losses, which meant cutting back on the granting of future loans.
There also are fewer lenders to make small business loans because of industry consolidation and bank failures. Community banks, in particular, were among the most vulnerable, and those are the banks that usually do the most small business lending.
On the bright side, the void opened the door to a lot of alternative lending, such as peer-to-peer loans and crowdsourcing, the
But with job growth and the housing market clawing their way back, even traditional commercial lenders are starting to perk up again.
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