If a bank can't help you, aim for a 'micro loan.'

New Mexico Business Journal, Sept, 1996 by Sue Bohannan Mann

Strong testimonials give A-pluses to New Mexico's microlenders who make small loans to people who don't qualify at banks. With strong character and ideas to match, would-be entrepreneurs can obtain "micro loans" from at least three organizations in the state - ACCION New Mexico, a nonprofit, private sector company; WESST Corp., a nonprofit foundation geared to helping women and minorities, and the New Mexico Community Loan Fund.

In addition, the Small Business Administration now screens one-page bank loan applications and guarantees loans in increments up to $100,000, and the New Mexico Community Loan Fund also deals with customers who tend to be spurned by conventional banks.

"If we hadn't connected with ACCION, we wouldn't be here today," says George Kenefic who, with his wife and business partner Melinda, operates Celebro, a natural fiber women's clothing store. "We can say we're in this location because their loan manager okayed our loan for $500 based on our word alone."

The Kenefics recently celebrated with a grand opening of their store at its new location in Albuquerque's Nob Hill area. With their third loan from ACCION, the state's largest microlender (in numbers, not dollars), Melinda and George are back on their feet with a renewed sense of purpose and self trust.

ACCION charges 16 percent interest on loans, several percentage points above the prime interest rates because it obtains capital from banks and pays overhead with the extra interest. Conventional financial institutions find it impractical to make loans under $10,000 and at any level with no strong credit rating or collateral.

"We have learned more from our clients," says ACCION's executive director Anne Haines Yatskowitz, "than they have possibly gleaned from us. We like to think we have merely helped bring out what was deep inside our clients all along."

"Our goal as a business is to become self-sustaining," says Yatskowitz. Today the company rents downtown offices below market value and treasures the help and contributions of strong business leaders such as Bob Taichert, a lawyer, who volunteers as ACCION board president, and Robert Espat, owner of Roses SW Papers, who serves as chairman.

The payback since ACCION made its first loan in March 1994 stands above 98 percent, a rate any bank would be proud of. Since then, 486 loans have been made, generating $3 million in the community from micro businesses.

Micro loans also have gained a good name at the SBA office in Albuquerque.

"We used to pull our hair," says Jerry Dukaukus, "and drown in the paper work. Now a sharp loan officer can eyeball these one-page applications when they're filled out properly, make a few phone calls and determine if the loan can be approved."

Lo-Doc, a nickname for the Low-Documentation Loan, comprises 40 to 50 percent of all loans approved throughout the state. All New Mexico loans are screened and approved through the Albuquerque office. This business indicator also highlights the sense of need among small business owners to airlift business ideas and help get them off the ground. Though credit records and assets play a strong role in who is approved, the individual's character and credit history favorably weight the applicant's scales. If inadequate collateral comprises the only unfavorable factor, loans usually are not declined.

SBA often recommends both ACCION and WESST to people seeking financial aid. During his recent visit, Philip Lader, the SBA administrator, said that he was here because New Mexico has one of the nation's most successful women's business development programs - WESST, an acronym for Women's Economic Self-Sufficiency Team, that helps women and minorities in business through education, counseling and loans. With six field offices, its employees offer business consulting and training, coupled with loans up to $5,000.

"We ask our clients to come in and see us for the first three months after they get a loan," says Deborah Wijenje, loan fund administrator, "followed by quarterly visits thereafter. We ask that they bring a short financial profit and loss statement, so that we can see where they are and if they are having any problems." If, for instance, a seasonal down-swing occurs, interest-only payments can be made for a short term.

Although WESST Corp. started in 1988 as a business consulting agency, the need for direct assistance became obvious. The Sisters of Charity in the Midwest invested their retirement fund in the corporation's loan fund. And WESST recently received $250,000 from the City of Albuquerque for investment in "pockets of poverty." Money from loans goes back into the fund to help sustain the balance at its current level. Public Service Company of New Mexico donates office space to the group.

Diane Baca of Silver City first learned about the possibility of getting a business loan from Jennifer Craig in the Las Cruces office. "WESST was a lifesaver to me," she says. She had come back to Silver City as a single mother because her son's grandparents lived there. She received food stamps because she couldn't get a job, but with two loans from WESST, she remodeled a 100-year-old building, opened Diane's Bakery and Cafe, and 2,000 people came through on opening day.