Ask Jackie Green why, after 20-plus years working as a manufacturing manager, she decided to start her own bakery in 2009, and she’ll cite the layoffs.
Three straight times – first in Winston-Salem, then in Arkansas and finally in Durham – Green was let go from manufacturing jobs. Green, a talented baker who would regularly reward her colleagues with cakes and other baked goods, decided it was safer to rely on those skills than face the uncertainty of continuing a career in manufacturing.
“I started baking out of necessity,” said Green, 47, who has two children ages 13 and 16.
But after a year of operating Sweet Cheeks Bakery out of her Holly Springs home, Green needed capital to upgrade the cooking equipment in her kitchen. This was a problem.
“Everybody kept saying, well, you got to have $30,000 worth of collateral, you got to have A-plus credit,” she said. Green had neither, having already spent $30,000 of her own money to build up the business to that point. She ended up applying for a loan with The Support Center, a Raleigh-based nonprofit that offers several loan programs to North Carolina businesses that can’t access capital through traditional means.
Green first received a $40,000 loan from a program the center operates through the Generations Community Credit Union in Durham. Two years later, she got a second $160,000 loan through its small business lending program that is allowing her to open a store in Apex.
The Support Center is a certified Community Development Financial Institution, one of several in the state that provides capital to those who can’t access it in traditional ways. CDFIs are seeing increased interest in their programs, in part because traditional banks have become much more selective in who they are willing to loan money to.
“Banks have significantly tightened their credit parameters,” said Charlie Cleary, director of the SBA 504 lending program for Durham-based Self-Help, one of the largest CDFIs in the country with $2 billion in assets. “It seems like they’re willing to lend but only to very well-qualified borrowers.”
Cleary notes that, because of the severity and the length of the economic downturn, even many established businesses now find themselves being labeled less desirable credit risks.
Access to capital can be particularly problematic for those seeking so-called micro-loans, which typically hover in the $50,000 and under range. Self-Help, which does some micro-lending, refers clients to The Support Center that don’t fit its lending profile.
“We’re really focused on service or product businesses that are growing and probably a little less focused than we have in the past around retail and restaurant businesses because of the current economic conditions,” said Brian Schneiderman, Self-Help’s director of commercial lending.
While CDFIs have a larger appetite for risk than traditional lenders, that doesn’t mean they simply rubber stamp any applicant who walks in the door.
“Sometimes we see borrowers that say, well, you’re a nonprofit you are supposed to give me a loan but they aren’t necessarily bringing a compelling business and resources to the table,” said Schneiderman.
“We vet these loans as any other lender would because the lending concept is the same,” said Roberta McCullough, vice president of business services and operations for The Support Center. “But we just dig a little deeper and listen to the story. Fortunately, thus far our portfolio is performing very well.”
McCullough said there are two things that would automatically disqualify an applicant from receiving a loan from The Support Center’s small business lending program. One would be if the person is currently going through a bankruptcy – having a past bankruptcy on your credit history is not a deal breaker. The other is if an applicant has unsatisfied tax liens against them.
Green submitted her business plan and detailed how the money she was borrowing would be allocated. In addition to using her latest loan to upfit her new store on E. Williams Street, Green is also expecting to hire several employees to meet the growing demand for her cakes, pies, cookies, brownies and pastries.
Those new hires will join an enterprise that until now has been very much a one-woman show.
“My hours are whatever’s necessary,” Green said. “Sometimes I don’t go to sleep at all.”