By RACHEL REYNOLDS
Jacyra Biven was turned down for a loan by three commercial banks before eventually accepting her then-boyfriend’s offer to lend her $12,000 for her business.
“I was really frustrated,” said Biven, 38, owner of Jacyra’s Exclusive Designs, a designer/manufacturer of clothes for women over 6 feet tall. “I had excellent credit, A-1 credit, perfect credit. My business made money, but they turned me down because I had no collateral.”
Biven, whose Slauson Ave. business posted 1997 revenues of $60,000, used the $12,000 loan to buy materials to fill existing orders and has since repaid her former boyfriend.
“It was a great situation because he didn’t charge me interest,” she said. “It gave me a boost.”
Biven’s is one of numerous inner-city businesses that have been turned away by commercial banks and forced to rely on family and friends, credit cards, second jobs, home equity loans, government-sponsored programs and other alternative methods of raising capital to finance their enterprises.
“There are a lot of businesses there (in the inner city) that are just not on the radar screen of conventional banking,” said Bruce Dobb, chief credit officer of the revolving loan fund at the Valley Economic Development Center, which provides low-interest loans to such businesses.
That’s because many inner-city businesses have insufficient collateral, don’t keep adequate records, or are reluctant to deal with a financial world that they don’t really understand, according to agencies that provide technical assistance to these businesses.
“It’s one of the major stumbling blocks we have,” said Hernando Olivares, senior business consultant at the VEDC. “When they start hearing about all the documents they have to present (to apply for a bank loan), they get discouraged.”
That discouragement arises, Olivares said, because many small-business owners have not maintained the complete business records that lenders require, or they feel overwhelmed by the prospect of having to compile those records.
Bona Lee, owner of Maple Dye, a garment-dying business at 196 E. Jefferson Blvd., just south of downtown, knows about being turned down for a bank loan. She said she ended up getting a cash advance on her credit card for about $30,000 and borrowing money from her mother and brother last year to raise money for working capital during a slow period at her business.
“We tried to get a loan from a bank, but we couldn’t,” said Lee, who also liquidated personal assets to ease the cash crunch. She said a friend took over the payments of her car, and Lee started driving the company car so she could save on expenses. Lee eventually secured a loan from the VEDC for $23,000.
Beyond tapping friends and family or personal resources, many owners of small or start-up businesses moonlight at second or third jobs to help finance their companies.
Mark House works two jobs in addition to running his casket-making business. On weekends, House works a 56-hour shift from 2 p.m. on Friday to 10 p.m. on Sunday as a probation officer at the Challenger Youth Memorial Center in Lancaster. And three times a week, from 10 p.m. to 6 a.m., he works the night shift at a juvenile group home.
During weekdays, he works at growing his company, Winthorp Industries Inc., which manufactures metal caskets that it sells to mortuaries, casket companies and the general public. Winthorp markets its products under the brand name Briarwood Caskets and has its operations in Lynwood near Watts.
Though he doesn’t get much sleep with his current schedule, House says he believes the opportunity to own his own business is worth it.
“One of the biggest satisfactions is employing people; we’re all dependent on this little venture,” said House, 32, who has two part-timers and whose business generated $70,000 in sales last year. “I would like to grow it into a large company that can provide for the community and the people in the community.”
To raise capital, House said, he approached five separate commercial banks for a loan and was turned down by all of them.
“It was quite frustrating actually,” he said. “They had you fill out lots of paperwork, but you knew almost from the start that you were going to be turned down. I think they were looking for a person coming in with a lot of collateral, someone with hard assets, a house or something. At that point, you figured you would have to finance it yourself.”
In addition to moonlighting at other jobs, House secured a loan earlier this year from the VEDC for $15,000 to purchase equipment and inventory. House said he hopes eventually to be able to work at his company full time.
Government programs and non-profit organizations often serve as the only safety net for such businesses. Linda Smith, director of the business resource center at FAME Renaissance, a non-profit economic development organization, said she has seen many businesses “struggle forever and never reach their potential.”
Her organization, an affiliate of the First African Methodist Episcopal Church, oversees five loan programs aimed at assisting businesses that have had trouble securing conventional financing. The programs are funded by public- and private-sector sources.
Smith said her organization is also working to attract venture capital for inner-city business development. “There are lots of loan programs,” she said. “What a lot of these businesses really need is equity.”
To attract equity investment to the inner city will require a coordinated effort from government, the private sector and non-profits, Smith said.
FAME Renaissance is currently in the process of forming a $10 million to $20 million equity fund, with Wells Fargo as a lead investor.
The fund hopes to make its first investment by the end of the second quarter, Smith said. Its investments $250,000 to $1 million each will be in existing inner-city businesses with solid management teams and high growth potential in terms of sales and jobs.