Small-business lending: Growing the local economy, one loan at a time

Businesses need capital to grow. And strong local economies need ways to grow local businesses. But as local business owner Kudzai Mabunda learned, getting the money can be an arduous and frustrating process.

Mabunda had long dreamed of owning her own business. With a master’s degree in urban planning, the Zimbabwe native wanted to start her own in-home center for mentally ill and elderly adults. She also wanted to make a real-estate investment. So when she and her husband moved to North Carolina in 2004, Mabunda “was happy to find that things were so laid back. …  I realized that I could pursue my dream and spread my wings. I got a real-estate license to buy my own home [for] use as a residential facility.”

But her dream proved complex to bring about. After buying the building, Mabunda faced a dilemma that stymies many small-business owners: “I used up all my funds that I had saved up in the remodeling of the home into a facility and for licensure and furniture. I had no working capital at that time.”

She soon realized that she needed a loan. Mabunda had no more savings; she couldn’t get a home equity line because she had already tapped out the equity in her home; she had no wealthy friends who wanted to invest in her business.

Mabunda approached several local banks but was turned down. She was a newcomer to the area, with no track record of working successfully in her chosen field; she was going into a field that was not regarded by many lenders as a solid money-maker; and she was asking for a working capital loan. Such loans can be hard to come by, since they don’t involve fixed asset purchases.

“I was very devastated when all the banks told me I was a risk, and my business was not a business they supported,” said Mabunda. “But I did not let my dreams be shut down. I called 211 and went on the Internet to look for organizations that would work with and lend to women in business.”

She found Self-Help Credit Union.

Mabunda came to Self-Help at a point of frustration, but we were able to look at her loan for the following reasons: We are a community development financial institution and mission lender, with the purpose of serving borrowers who have been historically “underserved” by traditional lenders; such borrowers include African-American and woman-owned businesses; and we have a lot of experience in doing loans to care facilities of all kinds, including in-home centers.

Nonetheless, Mabunda’s loan was complicated. We asked her a bunch of questions. We made her fill in all kinds of paperwork. Important point: Mabunda could easily have gotten totally discouraged and walked away, but she didn’t. Mabunda knew that, if she could just get over this hurdle, she could fulfill her dream.

She could tell that all the planning we were making her do — including a detailed business plan with cash-flow projections — was for her sake. The process gave her a chance to put numbers to her dream and see if they made sense. Mabunda could test out scenarios and anticipate possible pitfalls.

Although at first she had said she was not sure how much working capital she really needed, the process of planning and looking at the difference between her anticipated revenues (projected conservatively) and her anticipated expenses (projected high) made Mabunda realize that her working capital need was actually smaller than she’d thought.

In the end, Mabunda got her first start-up loan from Self-Help Credit Union.

Then, in 2010, she opened another residential home, and Self-Help loaned her funds for the mortgage. After building that second business, she approached Mountain BizWorks, another CDFI, for a loan to grow her business, Topic Family Care. Mabunda received a loan from Mountain BizWorks for expanding into the building’s lower level, adding space for new residents.

Today she has three full-time employees, one part-time employee, and accommodations for 10 residents, who enjoy around-the-clock care in a comfortable home environment. Mabunda also ensures that her residents learn independent living skills; and three of her residents have been discharged to live independently.

Best of all, Mabunda is now so successful that she is probably “bankable.” This is often how things work: Folks start out with a lender who is willing to take a little more risk, and gradually, over time, if they are successful, they graduate to getting loans from traditional banks.

In short, it sometimes takes persistent, determined borrowers to get that first commercial loan — borrowers who are willing to fill out all the paperwork, make their way through the planning process, and turn in all the documentation, because they believe enough in their dream to meet the lender half way.

And it takes a village of multiple lenders, with different lending goals, to make sure that our local small businesses get the financing they need.

— Jane Hatley is the WNC regional director for Self-Help Credit Union in Asheville, where she has worked since 2001, first as a commercial loan officer and then a business development officer, before becoming director upon Joyce Harrison's retirement in 2012.