City unveils Grow Modesto Fund

Officials will unveil on Thursday the Grow Modesto Fund, a $500,000 program to provide loans to small businesses that can’t get conventional bank loans.

The fund is a partnership among Modesto, the nonprofit Fresno Community Development Financial Institution and the Stanislaus Business Alliance. The city and the FCDFI are providing $250,000 each, and the alliance’s Small Business Development Center is serving as the program’s point of contact and providing the businesses with other assistance, such as help with marketing and a business plan.

Modesto’s funding is coming from part of the federal Community Development Block Grant funding it receives. The FCDFI is funded in part by the federal government and banks.

Officials will hold a 9 a.m. news conference at Signs and Banners Express, 521 Winmoore Way, Suite E, to publicize the program. The FCDFI lent the business $20,000 in April. FCDFI business development manager Jeremy Hofer said the loan was not part of the Grow Modesto Fund, but the business is receiving assistance from the alliance through the Grow Modesto Fund.

Adriana Parra said she and her husband, Ramiro Laiton, founded Signs and Banners Express in 1999 and its main product is producing vinyl wraps or banners that go on the sides of trucks.

She said Signs and Banners Express could not get a bank loan because it went through a rough patch during the recession. But she said the business has taken off since receiving the SBA loan and help from the alliance. She said orders are up 40 percent and she is about to quit her other job so she can work full time in the family business. “Right now,” she said, “we are pretty, pretty busy. My husband is working 16-hour days.”

Community Development Financial Institutions are certified by the U.S. Department of the Treasury and work in market niches underserved by traditional financial institutions, according to a city staff report.

Hofer said the Fresno Community Development Financial Institution serves 12 counties, including Stanislaus, and has lent about $12 million since its inception in 2008. He said the FCDFI has written off less than 2 percent of what it has lent and has a default rate – that’s when a business is 90 or more days behind in its payments – of less than 5 percent.

He said those percentages are higher than those of a conventional bank, but he said the FCDFI works with clients who have more financial risk. He said that’s why FCDFI interests rates are 7 percent to 9 percent, while a bank would charge 6 percent to 6.5 percent for a business loan.

Hofer said the Fresno Community Development Financial Institution focuses on low- to moderate-income communities and its funding can make a huge difference. He said it can help a family-owned small business prosper and hire employees who gain skills and experience as well as a paycheck. “The economy is built on small businesses,” Hofer said. “This is economic development from the grass roots.”

Hofer said having the alliance as part of the partnership is critical because of the help it will provide to the small businesses and startups. He said that kind of help typically is not available from a bank.

Alliance Small Business Development Center director Kurtis Clark said the hope is that the Grow Modesto Fund will attract investment from banks and other institutions so it can make more loans and that it will inspire other Valley cities and counties to start their own funds. He said Valley small businesses and startups need access to more financing.

“In the long term,” he said, “we are trying to get more capital into the San Joaquin Valley.”

The loans from $5,000 to $300,000 are for startup and existing businesses for working capital, equipment, office improvements and to refinance business debt, according to a Modesto news release. The program is for Modesto-area businesses and startups. Those interested in applying for a loan can call the alliance’s Small Business Development Center at 209-567-4910.

This story was originally published August 26, 2015 at 4:06 PM with the headline "City unveils Grow Modesto Fund."