Monday, February 28, 2011

San Diego Business Journal Features ACCION!

Taking Accion: Nonprofit Provides Boost to Small Businesses

FINANCE: Organization Has Distributed More Than $15 Million in Loans

Executive director: Elizabeth Makee.
Chairman of the board: Gordon Boerner.
Annual budget: $1,089,928.
No. of volunteers: 12.
Headquarters: Market Creek Plaza in Diamond area of San Diego.
Year founded: 1994.

Mission of organization: Provider of micro-loans, ranging from $300 to $35,000, and support services to small businesses that lack access to traditional financing sources.

Mike Colvin had a concept for a small business, a plan, and a $50,000 nest egg to launch the enterprise, a European-style delicatessen. What he didn’t have but needed desperately was additional working capital to help defray the startup costs to renovate the space, and pay for inventory.

Having decent credit, Colvin turned to three banks in mid-2009 but they all declined to advance him credit.
“They all told me they couldn’t make me a loan without being open for at least a year,” said Colvin, 45.
He then heard about Accion San Diego, a provider of business loans from $300 to $35,000, aimed at helping small startup businesses or borrowers with a dinged credit history.

The nonprofit organization looked at Colvin’s plan, his credit history and business plan, and advanced him a three-year, $20,000 loan at 14 percent annually. In late 2009, Colvin and his partner, Julius Patam, opened Savory Deli & Market in the University Heights area of San Diego. While the business in the restaurant-rich area was a bit slow getting out of the gate, Colvin said the restaurant’s sales last year broke through to six figures and is on track to grow 20 percent this year.
If the deli continues picking up catering jobs and obtains a beer and wine license, Colvin said he’ll add a part-time job to go with the three existing jobs at the deli.

Helping More Businesses
More startup businesses like Colvin’s are finding the financing they need at Accion, which recently passed $15 million in dispersed loans for its 16-year history. Elizabeth Makee, Accion San Diego’s executive director, said many of the borrowers who got loans did not have much of a credit history, weren’t in business very long, or had past “credit challenges” that excluded them from obtaining traditional bank financing.
In the last three years, Makee said there’s been a trend in larger, existing businesses seeking financing, which has led to larger loan sizes.

In many instances, banks that rejected these borrowers are sending them to Accion’s office in the Diamond area of San Diego. Gordon Boerner, a senior vice president with U.S. Bank and chairman of Accion’s board, said he pitches banks all the time to find new clients. “My pitch to banks is to support us by sending us your customers who you cannot help. If they are approved (by Accion), then by their third loan, we may be sending them back to the bank,” Boerner said.

From 2008 to the end of last year, Accion made 376 loans totaling $3.88 million. The average loan size was a bit more than $10,000, the organization said. That compared with activity from 2005 to 2007, when Accion made 528 loans for $3.8 million, an average of slightly more than $7,000 per loan.

Communication Up, Defaults Down
Because the borrowers lack a long track record in their businesses, and aren’t conforming in other ways to what banks require, Accion’s loans are far riskier. Yet overall default rates had been about 7 percent until the economy began tanking in 2007, Makee said.

“There was a small uptick in defaults during the Great Recession in the last two years,” she said. “In 2008 and 2009, the rate increased to 9-10 percent. Last year, we increased our communication with borrowers and were able to get it back down to about 7 percent.”

Accion obtains most of the funds it lends out from commercial banks, which provide the money to help garner higher ratings from regulators on their community reinvestment activity. Last year, about a dozen banks provided $216,000 in funds to the organization, or 55 percent of the total. An additional 40 percent came from government sources, and the remainder was derived from individuals and foundations, according to the group.

As Accion’s clients and funding have increased, so has its overall portfolio. After its first year in 1994, Accion’s total portfolio was $6,000. By 2002, it was $900,000. At the end of last year, it was nearly $2.5 million.

Although it’s certainly taking greater risks than many banks, Accion carefully evaluates every borrower, looking at 20 factors before deciding whether a loan is approved, Makee said.

“We have to be good stewards of the money we get because we want the banks to keep giving us money,” Boerner said. “We have to prove we can deliver.”


  1. Now, there are times that the business needs more capital or additional capital to support the production and progress of the business. Continues progress is what a business needs to keep up with the completion and it needs more financing to achieve it.


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