Albuquerque Development Capital - Help for Small Business

New Mexico Business Journal, Dec, 1990

Albuquerque Development Capital

Albuquerque Development Capital is another source of funding for small businesses.

Albuquerque Development Capital grew out of a suggestion by the Citizens Participation Group. The group was assessing community needs and how best to administer Housing and Urban Development (HUD) funds. While the program was set up several years ago and ran under the auspices of the Citizens group, the current program, complete with staff, got underway in July of this year.

Richard Asenape, manager of the program, says the program is not private, it is administered by the city with funding from HUD. The program targets a specific pocket of poverty within the downtown area and its environs. The issue at stake is the creation of jobs within the Barelas community bordered by Coal, 4th Street, and south to Bridge.

Albuquerque Development Capital can guarantee loans to small businesses, depending on the number and type of jobs which will be created. The jobs must go to low or moderate income people who don't need a lot of training.

The program uses a means testing, in which the borrower must demonstrate a need for financial assistance. A job analysis will be conducted, plus a financial analysis on the business. Then Albuquerque Development Capital will help negotiate a guarantee for financial assistance with a bank.

Asenape cites a recent example. Baca's Trees Inc. is a landscaping firm which works with Albuquerque Public Schools and Kirtland Air Force Base. Baca's needed a loan in order to create five jobs. Albuquerque Development Capital successfully negotiated with a local bank for the amount. Half of the loan funds would be provided by the bank, half by ADC.

After the loan negotiation, Baca's put together a training program by going to Work Unlimited to recruit new employees. Work Unlimited helps provide job training and placement for low and moderate income people who are trying to enter the work force.

Another example is Firoie Industries, which won a defense contract for laser beam technology. The company won a three-year contract to do research but needed a large line of credit up front in order to create 19 jobs, 10 of which would go to low and moderate income applicants.

Firoie agreed to find business space within the Barelas area. The company needed assembly people, entry-level draftsmen, clerical help and technicians. Albuquerque Development Capital again negotiated with a local bank to split the cost of the start-up loan.

A third example is the Barelas Coffee House. The restaurant needed to expand but had trouble with the funding gap between collateral and monies needed for expansion. Again, ADC stepped in to fill that gap, in much the same way a real estate bridge loan helps people moving from one building to another.

With a loan from The Bank of New Mexico, Albuquerque, the restaurant created 15 new jobs, nearly doubling its size.

The decision to concentrate on the Barelas area was made deliberately. By drawing people from a neighborhood into new businesses and jobs, ADC is able to leverage federal dollars to a small area where a real difference can be made and the results are quite tangible. Asenape says ADC doesn't want to spread itself too thinly and not see the impact of the funds.

Asenape says ADC is working with 10 businesses where the negotiations are nearly completed with the banks.

While the program has been around for awhile, a stumbling block has been the failure of businesses to qualify for lack of collateral or business skills. ADC is helping address that problem by teaming up with Albuquerque Technical Vocational Institute through the Business and Industrial Growth Through Education project, a 17 week training course.

Business people can get into the program and learn how to write a business plan, develop financial analyses and projections. Then they meet with a committee made up of bankers, a representative of the Small Business Administration, WESST corp, the New Mexico Commission on Development Loan Funds to review the business proposals.

The Albuquerque Development Capital will then be able to set up small direct loans to the entrepreneurs so they can bridge the gap they need to get bank loans which will require collateral. ADC will abate the principal and interest on the loans they initiate for the first year or two of operation. Then loan payments will begin.

Money for the projects comes primarily from HUD funds, but private investors are also involved. The Community Reinvestment Act encourages banks to make loans in blighted, low-income areas, which gives banks the opportunity to become involved in the project. Results of projects like this will be published annually by the Federal Reserve Board.

For further information contact Albuquerque Development Capital at 764-1730.