Players/16″/mike1st/2ndJC
By JASON BOOTH
Staff Reporter
An inner-city entrepreneur has a variety of sources to turn to for expansion capital.
The first stop is usually the local commercial bank, though many experts say that move would be futile for most urban businesses. Not only do few inner-city entrepreneurs have enough equity or detailed business records to satisfy loan officers, getting rejected by a bank could hurt their chances of getting financing down the road.
Other sources of capital include the federally funded Los Angeles Community Development Bank, which is willing to make loans to riskier borrowers, and several grass-roots business advocacy groups that offer assistance in securing loans.
Here is a look at some of the major entities involved in the inner-city lending in Los Angeles.
Bank of America Community Development Bank
Created eight years ago, the community lending wing of San Francisco-based BankAmerica Corp. last year booked over $1 billion worth of small-business, housing and consumer loans.
An increasing amount of BofA’s loans of up to $100,000 are based on the personal credit rating of business owners rather that the performance of their businesses. The bank is also among the biggest suppliers of loans guaranteed by the U.S. Small Business Administration, which generally go to borrowers with riskier credit ratings.
Wells Fargo Bank
Though sometimes criticized for not having enough branches in South Central, Wells Fargo is a major supplier of capital to small businesses.
In the first three quarters of 1997 the bank made $250 million in small-business loans in Los Angeles. The bank also makes grants to various grass-roots business groups, including a recent $2.5 million donation to a venture capital fund being set up by FAME Renaissance, a South Central business advocacy group.
Los Angeles Community Development Bank
Once considered something of a panacea for the economic problems plaguing local blighted neighborhoods, the LACDB was set up in 1995 with a federal grant of $430 million. While that grant, once fully leveraged, is said to be sufficient to generate more than $1 billion in loans, the LACDB has only loaned $25 million has so far. To meet the growing need for equity in the inner city, LACDB is currently setting up a $50 million venture capital fund.
U.S. Small Business Administration
Even though it issues few loans of its own, the SBA plays a critical role by guaranteeing commercial loans to small businesses that would not qualify for conventional bank loans. In fiscal 1997, the Los Angeles office of the SBA facilitated the lending of more than $660 million worth of loans, of which $290 million went to minority-owned businesses. The SBA also sponsors a network of Small Business Development Centers that offer technical support to business owners and entrepreneurs.
FAME Renaissance
This grass-roots business development group was set up in the aftermath of the 1992 riots. Affiliated with the First African Methodist Episcopal Church, the group provides small-business loans and technical assistance to minority business owners. Using donations from major corporations and banks, the group has funded more than $1 million worth of loans to inner-city businesses. It is also setting up a $20 million venture capital fund to take equity stakes in local inner-city businesses.
Operation Hope
Also created to help South Central recover from the 1992 civil unrest, this business advocacy group says it has facilitated more than $9 million worth of loans to inner-city businesses and home buyers.
Typically, it works with promising businesses and help them eventually secure loans from commercial banks.
The Operation Hope banking center helps lower-income families open banks accounts and secure credit cards so they can begin developing sound credit histories.
