SANTA ROSA — Redwood Credit Union and Community Action Partnership of Sonoma County have launched a new collaborative program that aims to provide up to $1 million in capital to existing small-scale businesses and new startups, the two organizations announced.
The program offers financing for graduates of the partnership’s microbusiness development course, which provides financial education for aspiring entrepreneurs and current owners of small-scale companies. The program has graduated 30 people since its inception, helping to launch ventures including a landscape company, palette recycling, bakeries and a wholesale clothing outlet.
"Small businesses are the cornerstone of our economy. They create jobs when they grow and thrive," said Anne Benjamin, chief operating officer and executive vice president of Redwood Credit Union (redwoodcu.org). "We know that small microbusinesses need education to be successful."
The 15-course CAP Sonoma program, offered in both English and Spanish, combines education in business and personal financial literacy. The course enrolled its first cohort of students around 18 months ago, with instructors funded by a $120,000 grant from the John Jordan Foundation and additional financial support from Wells Fargo and Citigroup, said Lannie Medina, chief development officer of CAP Sonoma (capsonoma.org).
The course includes elements from both the nationally recognized NxLevel curriculum for small business and the Federal Deposit Insurance Corp.'s MoneySmart curriculum.
"It's marketing, finances -- the nuts and bolts of running a business," Ms. Medina said.
While the specific definition of "microbusiness" is up to interpretation, the U.S. Small Business Administration suggests that a staff not exceeding five individuals and startup costs no more than $35,000 as a general benchmark.
While the program has so far been successful in helping to launch or support a number of businesses, Ms. Medina noted that the availability of financing remained a key concern.
"People have so much hope after that class," she said. "But what they lacked was money."
It is an issue that has drawn interest ranging from regional North Bay lenders to the SBA itself -- while small sole proprietorship and "mom-and-pop" businesses are considered to have a disproportionately positive impact on a regional economy, those businesses often struggle to qualify for financing.
The problem is two-fold: those loans are generally less profitable for lenders, and also tend to represent a greater risk.
A handful of microbusiness loan specialists have sought to pursue those borrowers in the North Bay, with an approach that includes significant education and mentorship. San Francisco-based Working Solutions now operates an office in San Rafael, and Oakland-based Bay Area Small Business Finance has been expanding into the region with new microloan products from the SBA.
Community Action Partnership considered a crowdfunding or charitable approach to providing capital to those businesses, but ultimately found an interested partner with Redwood Credit Union.
"Many times, these companies don't have a track record or demonstrated skills. But education compensates for that," Ms. Benjamin said.
Graduates are expected to achieve at least 80 percent on a final exam and have 80 percent attendance -- along with the development of a business plan -- to be eligible for financing. Terms are flexible, and will be determined based on the nature of the individual business, Ms. Benjamin said.
"It isn't about taking somebody and shoehorning them into something that already exists -- it doesn't work for these very small microbusinesses," she said.