Loans for the little guys
'Microlending' evokes programs to aid high-risk entrepreneurs abroad. Why it may show up on your street.
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With the OBDC's help, Salfi and his partner qualified for a $40,000 loan, obtained the money in less than 90 days, and moved their business from its old 2,000-square-foot location to a 7,000-square-foot warehouse in Oakland.Skip to next paragraph
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"I don't think we'd still be in business without them," says Salfi. "We needed the capital to move to Oakland and we couldn't have pulled it off without them. They were an asset in advising us, and in providing us with the capital."
The OBDC loan enabled Salfi and his partner to take the business one step further. They leveraged the $40,000 loan into a $225,000 loan through another City of Oakland program, and used those funds to attract another $675,000 from private investors.
With production of Comet brand skateboards totaling several hundred a month, the partners recently stopped making boards for other companies and now concentrate solely on refining and developing the Comet brand.
Their aim is to raise another $250,000 to help them reach their goal of selling 1,500 boards a month by next year.
They also hope to expand into a clothing line and capture a 3 to 5 percent share of a fiercely competitive skateboard market. (There are some 100 skateboard companies, but fewer than 10 make their own boards.)
Salfi's plans for positioning his product include an aggressive ecologically conscious approach based on the fact that his boards are made from environmentally sustainable materials such as woods from "specially managed and certified" forest.
"I hadn't planned it would turn out like this," he says, looking back to when he started making a few boards by hand. "But I always had the dream to pull something like this together."
Microenterprise advocates say that that's the point - allowing people to fulfill their dreams.
While Salvi is doing so on a relatively large scale, many microentrepreneurs work on a much smaller basis. But they still still manage to make substantial gains.
A five-year study by the Self Employment Learning Project of the Aspen Institute, found 57 percent of microenterprise businesses surviving after five years, with average revenues increasing 27 percent and profits doubling in that period.
Some 72 percent of poor microentrepreneurs increased their household income during those five years, and more than half, 53 percent, moved above the poverty line.
"The microloan program both supports the American dream and makes that dream available," says Jody Raskind, chief of the microenterprise development branch of the SBA. "It's a grass-roots development program that allows for the development of business and the development of personal wealth based on self-employment.
"It's one everyone can look at." he adds, "and see something positive from it."
Juana Perez can't read or write. But she definitely knows her numbers.
A former migrant farm worker, she wanted a better life for herself and her husband. So Ms. Perez started a business in 1991 with $50. She bought a few cases of soda and set up shop inside her trailer home in a poor unincorporated section of McAllen, Texas.
Perez sold the sodas to children in her neighborhood. With her profits, she invested in more sodas and snacks, and began making jello and tortillas for sale as well.
"Ever since I was a little girl, I just loved business," says the Spanish-speaking Perez through an interpreter.
But when she asked a bank to lend her a few hundred dollars to grow the business a few years later, she was turned down. It wasn't until Perez met a loan officer from Accion Texas, a nonprofit microlender, that she found the help she needed.
With a $500 loan from Accion in 1998, she bought an adding machine and more inventory for her store. Her excellent repayment record - with loan payments often made with the quarters children used to pay for treats - qualified her for a second loan of $1,200 in 2000. She used that money to build a small carport and buy picnic tables so that her customers could eat outside and not in her kitchen. Last November, she took out a $3,500 loan to add a small building, which now serves as her store. Its inventory ranges from yo-yos and fans to sodas and bicycles.