Some loans come with a bonus of training, supervision

By Libby Clark, Columbian Web Editor

Published:

 

When small-business owner Susana Serna wanted to expand her medical clinic into a larger office this year, she didn’t even try to land a bank loan. She knew she wouldn’t qualify.

Six alternatives to fund your small business

Small Business Administration microloan program: sba.gov/financialassistance/borrowers/guaranteed/mlp

Oregon Association of Minority Entrepreneurs: oame.org/page.cfm?TITLE=SBA

Shorebank Enterprise Cascadia: sbpac.com/bins/site/templates

Washington Linked Deposit Program for women and minorities: omwbe.wa.gov/financing/ldp

Washington Community Alliance for Self-Help: washingtoncash.org

MercyCorps Northwest: mercycorpsnw.org

Susana Serna’s six tips for using alternative funding

  1. Explore different options. It helps to be Internet-savvy.

  2. Talk to SCORE or other small-business counselors.

  3. Don’t be offended if someone asks to see your finances.

  4. Take care of yourself: Make sure the loan you’re seeking won’t overburden your own finances.

  5. Network. Always carry a business card in your pocket.

  6. Set up a website and a Facebook page; it helps to show lenders that you advertise online.

Instead, Serna combed the Internet for alternative financing and found MercyCorps Northwest, the domestic affiliate of the Portland-based international disaster relief organization. It runs a small-business loan program for residents of Oregon and Washington who don’t qualify for traditional loans.

MercyCorps and a handful of other nonprofits or government programs in the Portland metro area continue to lend to small businesses, even as bank financing and other alternatives such as home equity lines of credit or credit cards have become much harder for business owners to qualify for, said Doug Cooper, assistant director of MercyCorps Northwest. The loans, in amounts ranging from $500 to $50,000, help businesses buy equipment, make improvements or repairs and fund expansions.

Still, getting a loan from MercyCorps or other alternative funders isn’t easy. MercyCorps, for example, requires that its applicants meet a long list of qualifications, including income restrictions, a good credit history and a feasible business plan. Borrowers must also go through training before and after they receive the loan.

“We have to know they’ll make good use of the dollars and they’ll pay it back,” Cooper said.

Time to upgrade

Serna, a nurse practitioner, started her practice five years ago to escape the high patient load and inflexible work hours of a larger medical clinic. She opened the Clinica de Salud Familiar in a 100-square-foot space in Vancouver in 2005 with one exam table, a desk and a handful of patients. The business name means “family health clinic” in Spanish.

Her business model is unusual: She doesn’t accept health insurance and instead charges her patients a flat $55 fee for regular check-ups and routine procedures and posts a list of prices for more complicated exams that involve laboratory testing. This has helped her keep overhead costs down and provide affordable care for uninsured patients.

A native of Mexico, she caters to Spanish-only speakers, who comprise about 40 percent of her clientele. Many of her patients are also small-business owners with catastrophic health insurance coverage who need a less-expensive alternative to a doctor’s office for everyday medical care.

The demand for “safety net” medical care has grown in Clark County as the unemployment rate has skyrocketed. Serna saw her patient volume grow by 55 percent in 2009 and it’s on pace to grow another 30 percent this year, she said.

Her old office was getting too crowded and inefficient to handle further growth. So when a larger office in the same complex opened up, she started looking for ways to finance the improvements she’d need to transform the empty 600-square-foot room into a medical clinic.

Weighing the options

Banks and credit unions have strict loan standards based on a company’s earnings, its assets, its credit history, management and a range of other factors.

“A lot of financial institutions don’t wish to give brand new business people a bank loan,” said Bruce Lulow, a volunteer small-business counselor with SCORE in Vancouver. They don’t want to take the risk on them learning how to start a business.”

For businesses that are missing a few of the criteria for a bank loan, the best option may be a federal Small Business Administration loan, which guarantees the bank or credit union it will repay the bulk of the loan if the borrower defaults, Lulow said. But these loans also require the borrower to provide collateral.

MercyCorps Northwest’s loan program and similar alternatives, such as the SBA’s microloan program available through the Oregon Association of Minority Entrepreneurs, are there for businesses that don’t have the collateral or management experience to get an SBA-backed bank loan, Lulow said.

Serna briefly considered applying for a bank loan, but her credit wasn’t great. When a developer had threatened to buy her neighbor’s property and build a subdivision, Serna and her husband bought the property instead as an investment. The deal came at the height of the real estate bubble and two years later the property was facing foreclosure. They were forced into a short sale.

With poor credit as a result of that experience, she applied for a $5,000 MercyCorps loan.

Landing a loan

After completing the MercyCorps training program she received a $10,000 loan — an amount the nonprofit advised her would better meet her needs.

“The credit score is one indication, but it’s not the only indication (of a good borrower),” said MercyCorp’s Cooper. “We understand what her situation was and it wasn’t out of irresponsibility. There are reasons beyond (a borrower’s) control.”

Despite her credit history, Serna was an attractive borrower to MercyCorps because she had a track record of running her business successfully, Cooper said. And because her clinic serves uninsured or under-insured patients, her business benefits the larger community, a quality MercyCorps appreciates in its applicants, but doesn’t require, he said.

To stay within Clinica’s $10,000 remodeling budget, Serna’s husband did most of the work, building walls to partition the space into two exam rooms, a restroom, a small laboratory, reception area and an office that doubles as a supply closet. She hired an electrician and a plumber to do the permitted work. Most of the equipment and furnishings were bought secondhand from Craigslist. To finish the space, Serna painted the walls in cheery tropical yellow and pink.

The clinic moved in June into its new space at 9106 N.E. Highway 99 in Vancouver and Serna now provides a monthly update on her finances to her lender, along with her loan payments.

She’s now exploring other long-term funding options for expansion, including reclassifying her business as a 501(c)3 in order to qualify for federal grants available to nonprofit clinics run by nurse practitioners. She’d like to hire another nurse practitioner who specializes in mental health and continue growing her clientele.

“I’d like to grow steady,” Serna said, “not too fast.”