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
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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
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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
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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
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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
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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
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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
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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
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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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