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Opening Doors Addresses
Sacramento’s Small Business Financing Gap
A small Midtown restaurant has been in operation for a year and business is great, but the owner needs a loan to replace her refrigeration unit. Her bank considers her a start-up and isn’t able to help. The owner of a West Sacramento bicycle shop needs $25,000 for inventory to meet an increase in demand. Her business is strong and has a long track record. She visits several banks but they aren’t able to help with amounts that small. An expert cabinet maker in Rancho Cordova has long dreamed of opening his own business and now has the perfect opportunity, but can’t find any sources of financing for start-ups in the Sacramento area. Last week all of these business owners had nowhere to turn. This week, the situation is different. In response to a serious gap in financing in the Sacramento area market, Opening Doors has launched its Prosperity Project loan fund, providing financing in amounts under $50,000, targeting those who are unable to qualify for traditional loans.
Loans will be available to qualified low-to-moderate income entrepreneurs with interest rates of 7.75% or 8.5% depending on loan size, and for terms of three to five years. The loans have been made possible through Opening Doors’ participation in the SBA Microloan Intermediary program. We will borrow funds from the SBA and relend them to Sacramento area businesses. During the coming years, we plan to expand our loan fund using other government and private sources. Meanwhile, we will continue providing starter loans to refugee entrepreneurs, in amounts of $15,000 or less and at a 7.25% interest rate.
Opening Doors is able to bring this program to our community because of our partners. Wells Fargo and Comerica have provided critical financial support, and US Bank has made significant contributions as well. We are indebted to the local SBA office for all the assistance and support its staff has provided. Moving forward, partnering will be critical to the program’s operation.
When a loan applicant contacts us we will have them complete a pre-screening application which will help us identify any financial issues that would prevent them from being loan-ready. Those who are financially loan-ready will be referred to the business assistance part of our program. Opening Doors’ multicultural staff will work with those whose English is limited, but will refer English-speakers to our partners the SBDC and SCORE. These agencies, with their long histories of providing business assistance and training, will assist the entrepreneurs to develop the complete business plans that we will need in order to begin the underwriting process.
Opening Doors will also rely on partners for marketing our loans. We are in the process of expanding our partnerships with local banks and credit unions, providing their small business loan officers with an opportunity to refer customers who they aren’t able to lend to. We have put into place a referral feedback system that will enable us to track referral sources and keep them updated on loan client progress. Ultimately, we hope to send borrowers back to them, with the business size, skills, and capacity to apply for and receive the mainstream business loan products. We will also rely on our many community organization partners, and on our relationships with the local Chambers of Commerce and faith communities, to help us spread the word about the availability of small business loans at Opening Doors.
Working with our partners, we strive to enable underserved community members to realize their potential. We believe the Prosperity Project loan fund will be a powerful tool helping us to accomplish this goal. We are also confident that Prosperity Project loans and accompanying business assistance will lead to the development of a significant number of jobs to fuel our economy in the coming year, and many more in the years that follow.
To view our press release, click here.