The Los Angeles County Board of Supervisors voted Tuesday to develop a microloan program for small businesses that might otherwise rely on predatory lenders.
Supervisor Hilda Solis proposed the microloan program, highlighting the importance of small business owners to the overall economy and to lifting up economically disadvantaged communities.
“There are neighborhoods that have immense potential but they need a boost,” Solis said.
Getting access to safe and secure capital can be critical to launching businesses and funding growth, but traditional lenders often overestimate the risk of making a loan to low-income owners, Solis said. Owners may turn to pay day loans or high-interest loans and often become trapped in a cycle of debt that they struggle to repay.
Supervisor Mark Ridley-Thomas co-authored the motion.
“This is not a matter of altruism, this is a matter of common sense business practices, he said. “This tool can help steer people away from predatory lending and also provide seed funding for starting — and potentially sustaining — small businesses.”
The Pacific Asian Consortium in Employment, a local nonprofit organization that administers a microloan program, said its borrowers generate revenues of $188,000 on average for every $16,000 in loans.
The board instructed the Community Development Commission to work with county Chief Executive Officer Sachi Hamai and the Center for Strategic Partnerships to research and design a program and come back with recommendations for implementation and funding in six months. Input will be sought from the private sector, including from community-based organizations and mission-driven financial institutions working with underserved communities.
The board also approved a separate motion to establish the East L.A. Entrepreneur Center at Centro Maravilla Community Center.
The center will provide a range of support for local small businesses, including business development, access to capital, mentoring, credit repair and technical assistance, Solis said.