We Don't Do Stupid

I recently served on an access to capital panel with Michael Banner, president and CEO of the Los Angeles Local Development Corporation (LDC). A community development financial institution (CDFI), the mission of the LDC is to provide business loans to people and communities under-served by traditional financial institutions.

Targeting distressed communities and under-served ethnic groups (such as Latinos, African Americans and Asians) in the greater Los Angeles area, Banner and his team use a common sense approach to structuring creative loans to solve complicated problems a typical bank might shun. While the LDC may go where others fear to tread, Banner is an experienced banker and proudly claims that “we are prepared to take more risk, but we don’t do stupid”.

Since assuming the leadership role in 1995, Banner has grown the LDC’s assets to over $14 million from $4 million by focusing on business loans which are catalytic in nature. The impact to the community is even greater than the numbers would suggest as LDC often convinces other, more hesitant lenders and socially responsible investors to participate once it takes the lead. The loan amounts range from $25 thousand to over $5 million. The interest rates charged on all loans reflect the risk entailed and are often competitive with interest rates charged on SBA loans – don’t expect to see interest rates lower than what a bank might charge but Banner does say, “we don’t pretend, we just lend”. Success stories include loans to Homeboy Industries’ Silkscreening Division, the Big Saver Foods Shopping Center and Mao Foods.

With a double bottom line focus, LDC always asks how much of a difference the loan makes to the community. As real estate and fixed assets are often a visible symbol of that impact, real estate loans and term loans comprise almost 75 percent of LDC’s total loan portfolio. The balance of the loan portfolio consist of a wide variety of credits ranging from revolving lines of credits, equipment loans, and asset based working capital facilities to middle market borrowers, but LDC often leads participations or co-lends with other lenders to meet the larger borrowing needs of its clients.

LDC can help a business with its business loan requirements in a number of ways and thus serve many more borrowers than one would think given its small number of employees. In addition to being a direct lender, LDC can bring in other lenders as partners, syndicate entire loans and also serve as an advisor in structuring tax exempt loans for the acquisition of business real estate. Well connected within the financial community, LDC can direct borrowers to the right place even when they are not the solution themselves.

Don’t live in the Los Angeles area? More than 1,000 CDFIs operate in low-wealth communities in all 50 states and the District of Columbia. CDFIs can be banks, credit unions, loan funds, venture capital funds, community development corporations or micro enterprise loan funds. All are united in their primary mission of community development. Check out the CDFI website for a similar organization in your neighborhood!

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Tags : Los Angeles LDC , Michael Banner , CDFI , business loans , SBA