Solano Biz Grow - You Have Questions? We Have Answers!

February 26 2024

 

Dear Members, Partners, and Friends of the EDC,

I’m extremely proud to share with you that Solano Biz Grow, the Revolving Loan Fund (RLF) that the County entrusted us to create and run, has launched and our phone has been ringing off the hook. We are excited to get inexpensive capital into the hands of our small businesses, most of whom suffered during the pandemic. Although this process has been long, and difficult, at the end of the day we have achieved something that has never been done before. We have three local lenders, First Northern Bank, Valley Strong Credit Union, and Travis Credit Union working in partnership on a loan program. These three financial institutions have been amazing partners, and have used this collaboration to support businesses that generally do not qualify for a variety of reasons. You can read about how this program was built and the thought that went into every facet here.

Let me share some amazing, groundbreaking parts of this program. Banks don’t usually loan below a 680 credit score. The US Small Business Administration sets a minimum credit score of 650 for their 7A program, and 680 for their 504 program. At 630, we are assuming a lot more risk, but it’s a risk that we’re willing to take because we believe that, with the support of the Small Business Development Center (SBDC), our steadfast partner in building this program, we will make these riskier loans more likely to be successful. In the process, those businesses will raise their credit score and have access to cheaper capital moving forward. Let’s talk about our subprime interest rate of 6%. As of February 24, the prime lending rate is 8.5%. As you can see here, the majority of RLFs are prime plus 2%, or 10.5%. If you have a 630 credit score, you are looking at 18-20% interest rates for loans, or you end up doing what many small businesses do, use credit cards that are even higher. Again, if you go back to the list of RLFs, you’ll see that nearly all of them require equity, collateral, liens on property, and charge origination fees, and application fees. We are requiring none of these things. These are unsecured loans. The $250 application fee paid to the lender is not only reasonable, but it’s refunded to the borrower out of the loan administration fund. This fund will also cover the $25 a month paid to the banks for servicing each loan. 

Although this loan program is open to all qualifying businesses in Solano County, we have been sure to create this with an equity lens as we know that BIPOC businesses have been disproportionately affected and struggle to access capital. All of the decisions we made, from the credit score, the interest rate, the refundable application fee if you work with the SBDC to become a stronger business, were all created with equity in mind. Additionally, we went to great lengths to prequalify minority own businesses. Lastly, because we understand that representation matters, we have hired an entirely Bipoc team to run this program. We are also translating all documents into multiple languages. 

Although the $4 million American Rescue Plan (ARPA) funding was granted specifically to the Solano EDC to create and administer, it has always been part of the plan to resource our local Chambers, including the 3 ethnic chambers, and the Farm Bureau, to do the marketing since they are the closest point of contact to the small businesses in Solano County. $20,000, our entire marketing budget, was budgeted for the chambers, a budget that was approved by the Supervisors in an open session available to the public. Now that the deals are signed with the three banks and we’re off and running with the program, we’ll be signing MOU’s with the chambers to spread the word.

 

Please feel free to reach out to Wendi Reed if you have any further questions. Wendi@SolanoEDC.Org 

707-864-1855 x21 & 707-631-3891

 

Chris Rico

President/CEO