Transcript Document
CDFI Small Business
Lending: Its Our Time
Roberto Barragan, President
VEDC
VEDC
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Introduction
VEDC is the largest non profit small
business lender in Metro LA
Largest SBA Microlender and EDA RLF
in CA.
Sponsor of SBA 504/state guarantee
lender
Sponsor of federally chartered credit
union and SBA 7 a lender
VEDC
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A CDFI in a Credit Crunch
World
Financial Crisis
Skyrocketing Demand
Bank Support
SBA, State, CDFI Support
Why VEDC?
VEDC
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Financial Market Crisis
Dec. 2007: Recession Officially Begins
August 2008: Lehman Bros fails - Credit
Markets freeze, TARP happens
Oct. 2008: SBA Secondary Market Stalls; SBA
volume drops 50%
Oct 2008: After big losses, BofA dramatically
curtails 7(a) lending
Nov 2008: Chase buys Wamu
Dec. 2008: Wells acquires Wachovia
Feb. 2009: ARRA passed; SBA volume rises
Jul. 2009: CIT ( Major 7(a) lender) denied
federal bailout
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Small Business Credit Demand
March 2009: Amex cuts credit access
April 2009: HELOCs are frozen
nationwide
May 2009: BofA buys Merrill Lynch
September 2009 Goldman Sachs
announces 10,000 Small Businesses
October 2010: Starbucks announces
OFN Create Jobs effort
December 2010: Small Business and
Jobs Act
VEDC
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Federal Government Saves State Small
Business Programs
$164 million given to support
guaranteed lending and loan loss
reserve program
Loan guarantee limits increase to $2.5
million
11 small business financial development
corps receive minimum program support
CalCap program struggles with
insufficient bank participation
VEDC
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Increasing Small Business
Support from for CDFI Fund
Obama Administration increases CDFI
support by 500% to $250 million
US Treasury Financial Assistance
Program is increasingly focused on job
creation and business assistance
New Markets is focused on Commercial
Real Estate , no small business lending
Large focus on national intermediaries
and financial institutions
BEA grants limited to banks, not credit
unions
VEDC
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Why VEDC?
Significant due diligence focused on loan portfolio
performance:
Loans above $50k:>5% delinquency
NCOs at under 2% over the past 2 years
Loans below $50k: 14% delinquency
NCOs at under 4% over the past 2 years
Comprise 30% of VEDC portfolio
Entire portfolio delinquency currently under 8%
Portfolio Management Software combined with exp.
credit administration, inc bankers on loan committees
VEDC currently manages $24 Million in loan capital with
40% net assets and 4% loan loss reserves
VEDC
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Bank Support
Oct 2008: GE Money $500k in microloans
made;
Dec 2008: Merrill Lynch: $1 M low interest
loan for microlending; all lent by Feb 2009
Aug 2009: US Bank: $2 million EQ2 for
microlending: all monies lent within 12 mos.
Oct. 2009: BofA: $ 1M Accion LA program
approved
May 2010: Goldman Sachs: $7 mm loan and
$1 mm grant: $5 mm lent to date.
Sept. 2010: Wells Fargo $1 mm loan, lent in
90 days
Dec 2010: Chase $5 MM grant, VEDC goes
statewide
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Other Bank Support
Currently maintains referral programs
with Bank of America, Chase, Wells and
Citi
Chase: Financial support to Access to
Capital Center in LA, inc denial referrals
Citi: Statewide downtown ATC program
w CALED
BofA: Microloan program support
Wells: Supports statewide WTM
US Bank: SoCal microloan program
VEDC
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SBA Support
SBA 504/ARRA changes result in VEDC 504
1st year experience of $20 M lent
SBA 7(a)/ARRA changes result in $1.5 M
lent by VEDC sponsored credit union
SBA Microloan program receives additional
$750k in loan capital
SBA Primes approves $200k to VEDC for
entrepreneurial support
VEDC becomes Community Advantage
lender
VEDC
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VEDC Statewide Expansion
Chase makes $5 million grant to VEDC to expand
lending statewide: $50 million in lending in 3
years
Referrals from Chase branches (denials) and area
nonprofits and chambers
VEDC hires FT BDO to originate loans in Bay Area
Secures MOU with 30 organizations statewide to
originate loans
VEDC hires VP of Lending w prior bank experience
VEDC establishes VP of Marketing and
Communications to establish brand strategy
VEDC enters into MOU w CALED to operate statewide
EDA RLF using dormant state money
VEDC
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Where’s the Money Expos
Access to Capital Events hosted by
VEDC bringing together banks,
government and local organizations
Workshops and business speakers
Loan pavilion: Bank loan officers meet
with application ready borrowers
San Francisco: 250 businesses
San Diego: 300 businesses
LA: 900 businesses
VEDC
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VEDC as Small Business
Lender:
Market rate lender
Focused on 3 Cs (credit, collateral and
cashflow) and lend on 2
Intense underwriting and closing
processes focused on cash flow and
collateral perfection, respectively
Credit elsewhere: restaurants, startups
Diverse portfolio w extensive experience
in underserved markets
Strong collection practice and history
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What this means
Realization that there are few small business
lenders nationally,
We need more not less lending, especially to
small business in light of tighter credit
conditions
Banks are under close regulatory attention and
will continue to limit small business lending for
the next 12-18 months
So they need to invest in local and regional
mechanisms to support small business lending
With tighter budgets, cities and counties need
to outsource small business lending to CDFIs
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