Lexington, KY - Many small businesses owners in Kentucky who have been turned down for bank loans have found help from Community Ventures Corporation (CVC), a Kentucky-based nonprofit agency that makes loans to small businesses and mortgage holders.
Because so many business owners have qualified for loans through CVC, the agency was again named national "Microlender of the Year" by the Small Business Agency. CVC granted 14.5 percent of all of the microloans made nationally with SBA funds, a much higher percentage than the other agencies who were nominated. CVC made more microloans than did similar agencies in other states for two reasons. The agency chose to focus on these loans and its staff members have worked aggressively to let business owners know that funds are available and to process as many loans as possible.
CVC's CEO Kevin Smith said, "The economy is playing a large role in that high number. We're seeing businesses that in the past could go into a bank and get a loan not be able to, with tightening of credit."
From 2007's count of 55 loans, in one year the number of loans made jumped to 276. "That tells us the marketplace has changed drastically," Smith said.
Microloans, which start at $500 and can total up to $35,000 for new and existing businesses, have enabled numerous small businesses to stay afloat in these troubled economic times. A CVC client may borrow up to $20,000 without a bank denial letter. In previous years, most requests for microloans were from service-oriented business owners, such as landscapers. Retailers and other businesses that needed to have large inventories needed bigger loans. But now CVC is receiving microloan requests from retailers and other larger businesses, either to expand or to help them stay in business until the economy turns.
Founded in 1982, CVC's mission is to help families and businesses with the skills and financial backing needed to achieve financial independence. The agency focuses on small business ownership, home ownership, and job creation through expansion of existing businesses. Loans have been made to such diverse businesses as a private investigator, dental plate processor, coal mining training and safety company, and a mobile beautician.
While there are fewer startups applying for loans, CVC has received more requests for loans to expand existing businesses, to add employees, equipment, or inventory. "We haven't turned anyone away yet," Smith noted. But if requests for loans continue at this rate or even increase, "we'll have to borrow more money than we normally would, so we hope the federal government will have more funds (as a result of the economic stimulus package)," he explained.
CVC receives funds from Communityy Development Financial Institutions Fund (CDFI) in Washington for loans to larger businesses and for mortgages on houses. Funds from the New Markets Tax Credit can also be used for larger loans. Also more popular these days are loans through the SBA's 504 program. Borrowers have less exposure to banks than with 100 percent bank financing. Banks are also calling CVC because 504 loans reduce their risk. In this loan, the bank lends 50 percent of the money, the SBA lends 40 percent and the borrower obtains the final 10 percent from another source.
Smith said the one of his loan officers has been working with 18 business owners who want 504 loans, "just in the last two to three weeks."
Community Ventures Corporation assists business and home owners with more than loans. It has the funds and staff expertise to offer them assistance with problems that arise, even showing them sometimes how to avoid taking on more debt. The agency takes a preventive stance, offering training in various aspects of running a business and learning how to manage credit wisely to startup owners and first time homebuyers.
New businesses have a high rate of failure, but those whose owners seek assistance - loans, skill training, or both - from CVC average a higher success rate. Smith said, "Our staff sees the loss of a business as a loss to the community. They can identify with what such a loss does to both the owner of the business and its employees."
The increase in foreclosures has brought a significant number of desperate homeowners to CVC's offices. Many of them have ARMs (adjustable rate mortgages), and when their payments were increased, but their incomes were not, they risked losing their homes. In other cases, homeowners lost their jobs and could not make their payments. CVC has been able to help some of these people land new mortgages with better terms.
The increased demand for business loans, mortgages, and counseling makes for long days for CVC employees. "My staff steps up and I'm thankful for that," Smith noted.
CVC has offices in Lexington, Louisville, Campbellsville, Frankfort and Henderson that serve residents in the respective surrounding counties and adjoining counties. Twenty-seven people work for CVC, with 23 of them in the main office in Lexington. Future plans include adding offices in Bowling Green and Paducah to serve Kentucky residents living in these areas.