Leader in U.S. Microfinance Accion Provides Loans & Support
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Leader in U.S. Microfinance Accion Provides Loans & Support
- 1. Accion A Leader in U.S. Microfinance Add Name Here Add Title Here June xx, 2012
- 2. Agenda • Who is Accion? • How to Prepare for a Lender: Credit and Cash Flow • Accion Products • More than a Loan: Unique Program Opportunities
- 4. Accion Network Established in 1991 as the domestic arm of Accion International, a global microfinance organization ACCION Network represents 30% of micro-loan volume in the U.S.
- 5. An overview of the credit continuum *Credit cards, Microloans and Bank Loans build a credit history. Equity and Investments Bank SBA Loans ACCION MICROLOANS Credit Cards Loan Shark Pawn Shops Friends & Family Crowdfunding Jesse, recipient of the Sprout PersonalSavings Loan at ACCION, owner of Equity Brooklyn Taco. Manhattan, NY Jason, Accion client and owner of a home-based soap company
- 6. Why Accion? • Limited credit history • Informal financial documentation • Small capital needs • High risk industries "I wanted to create a welcoming space for • Under two years in business all," says Lyn, who began the studio with the help of her first ACCION USA small business loan two years ago. The business • Flexible, community-based lender became profitable one year after opening and grew to employ twelve part-time • Cater to home-based business employees. "Just as important," she continues, "I wanted to create work for myself that was fulfilling.“ - Lyn Genet Recitas, owner of Neighborhood Holistic in Harlem
- 7. Who do we lend to? Beauty & Salon Services 7% Transportation Construction, Rep 15% air & Electronics What type of 7% Entertainment, Me Clothing, Cosmeti business do cs, Jewelry & Retail dia, Telecom & Visual Arts 4% you have or 17% Wholesale 3% want to start? Auto & Vehicle Food & Beverage 3% 20% Professional Personal Services Services (Day (Office, Med, Educ Care, Cleaning, Language) ation) 2% 20% Arts & Crafts Production 2% Manufacturing 20% African <1% American
- 8. Credit and Cash Flow
- 9. What do lenders look for? The C’s of Borrowing Your ability and willingness to pay them back! 1. Credit 2. Cash Flow 3. Capital 4. Collateral 5. Character
- 10. Credit Today: Scoring Systems FICO Scoring Factors New Credit 10% Payment History 35% 30% Amounts Owed 15% 10% Length of Credit History Types of Credit Used FICO is still the most widely used system among lenders. Scores range from 300 to 850.
- 11. Key Strategies for Managing Credit Key Strategies for Managing Credit • Pay on time • Keep a healthy percentage of available revolving credit • Diversify your trade lines • Pay credit cards down one by one • Be proactive in calling your creditors • Check credit reports annually for errors at www.annualcreditreport.com • Use www.myfico.com to see a copy of your FICO credit score
- 12. Things to Consider: Coverage for a Loan Payment • Can your business afford the loan payments? • Is net income greater than 2x the loan payment? • Can you afford to pay yourself and cover your personal expenses?
- 13. How much would my monthly payment be? Principal $2,000 $5,000 $10,000 $20,000 Portion Loan Total $2,130 $5,280 $10,610 $20,910 (including closing fee & UCC fee) Term 12 24 30 40 Monthly 0.75 0.75 0.75 0.75 Interest Rate Monthly $186 $241 $396 $607 Payment
- 14. Things to Consider: Bank Statements • Are deposits greater than withdrawals? • Are there Insufficient Funds Fees (NSFs)? • Are the balances declining or increasing over time? • What are the frequent expenses?
- 15. Example of your bank statement analysis Sample Personal Bank account analysis:
- 17. Accion Loan Process Step 1: APPLY Apply and prequalify through Accion’s unique scoring model. STEP 2: INTERVIEW Submit STEP 5: RELATIONSHIP Repayment documents and get interviewed by a loan begins and clients receives ongoing consultant to review strengths and provide business and financial education. advice. Heesang, a New York based Accion client STEP 3: REVIEW Application is STEP 4: DECISION Loan is dispersed reviewed considering: if approved or client is given advice to credit, character, collateral/cosigner, cash improve. flow, industry, and loan purpose.
- 18. Products andand Programs Products Programs Product Definition Established Businesses Up to $50k (> 6 months) Emerging Businesses Up to $30K with outside cosigner (> 6 months but not yet profitable) Sprout Loan Home-based/incubator up to $5-*10K (< 6 months) without cosigner Secured Loans $500 and up Special Programs Women, Veterans, Green, Food and Beverage, Kiva, Credit Counseling Accion can help you repair your credit
- 19. Basic Loan Requirements • Registered business owner • Credit Score over 525 (FICO) • No more than $3,000 in past due debt* • No Bankruptcy in the last year • No Foreclosure in the last 2 years • No late payments on mortgage and rent in the last year Natasha, Accion client and owner of Natasha Wozniak Jewelry. Brooklyn, NY *Except The Sprout Loan, which cannot exceed $500
- 20. Typical Required Documents • Two Forms of personal identification • Most recent utility bill from home or business • Past 3 months of personal & business bank statements • Mortgage note showing terms • Business lease Emerging and Sprout loans “The biggest reward for me is seeing • Market study/business plan and 12 the enthusiasm from the benefits of months financial projections my business by my clients and employees.” Loans over $10,000 –Jessie, Accion client and owner of • Internal financial statements and last two Green City Growers years tax returns Boston, MA
- 21. Affordable Loans • Loan process: 5 to 10 business days* • Terms up to 60 months • Optional auto payments • Interest fixed rates: start at 8.99% average 11.99% • 3-5% closing fee or $100 for SBA program When Sandra moved to New York City, she • No prepayment penalties looked into getting a bank loan. Like many other immigrant entrepreneurs, Sandra had no • Payments applied to principle and formal credit history and could not find support interest from a bank."It was depressing to feel like I couldn't continue being a fashion designer because I couldn't find a loan," Sandra remembers. –Sandra, Accion client and designer at Sandra Baquero talking about how she came to Accion *Once all documents are collected
- 22. More Than a Loan • One-on-one: We provide coaching throughout the loan process on credit, cash flow and record keeping • Online: Free webinars and a monthly newsletter help create meaningful connections with our clients • Partnerships: We team up with other organizations to leverage resources “With Accion, it was more than just a loan. Through promotional opportunities, and maximize strengths Accion helped to get my business name out there.” –Kari, Accion client and owner of Morris Kitchen
- 23. More than just a loan: Unique Opportunities
- 24. Sam Adams Brewing the American Dream • Business education • Access to mentors and networks • Seasonal product integration and catering
- 25. Tory Burch Partnership • Educational events • High profile mentors “I have been so impressed with the mentors at the events. Every single one of them has said something memorable to me that has inspired action in my business, I can see that they really care and want to help us succeed.” Natasha, Accion client and owner of Natasha Wozniak Jewelry. Brooklyn, NY
- 26. Kiva.org • Loans up to $10,000 • Flexible loan requirements • Publicity for your business Luis's road to self-employment was not easy. Once unemployed and homeless, Luis's life changed when he found work making deliveries for a local bakery. On the morning of September 11, he made his usual delivery to the World Trade Center when his truck got lost in the rubble of the failing buildings. Through Kiva, Accion lent Luis the money he needed to get his business back in shape. Luis, Accion client. New York, NY
- 27. Yelp • Business coaching events • Assistance with your Yelp profile
- 28. Loans for Veterans (New York Only) • Low rate at 8.99% • Increased lending flexibility • Coaching and mentorship through SCORE, Veterans across America, and SBS
- 29. Accion’s Online Presence • Over 6,000 Twitter followers twitter.com/accion_usa • 2,000 people “like” our Facebook page www.facebook.com/accionusa • 30,000 subscribe to our monthly newsletters www.accionusa.org/email • Over 40,000 visits a month to our website www.accionusa.org • Partnership with http://dinero.univision.com/pequena-empresa
- 30. To Refer a Business Owner Contact NAME at XXX-XXX-XXXX and xxx@accionusa.org Refer to online application at www.accionusa.org/apply* Have client fax in paper application to XXX-XXX-XXXX
Hinweis der Redaktion
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- 2010 data: 618 loans 4.5 millionNational networkThe extended U.S. ACCION Network has supported 24,600 U.S. small businesses with $277 million. This network of licensees serving TX, LA, NM, CO, AZ, IL, and CA and our online lending platform provides a national footprint for microloan borrowers. ACCION Network = 30% of micro-loan volume in the U.S.Established in 1991 as the domestic arm of ACCION International, a global microfinance organizationThe Network has supported 24,600 with $277 MM Includes a number of stand alone microlenders throughout the country and an online lending platform
- Which of these help build personal credit?- What are the average bank rates? The loan rate for small businesses is based on the market rate for loans and is fundamentally related to the long-term federal borrowing rate. In early 2011, this long-term rate was at a low of about 4 percent, versus a 7.5 percent historical average. Due to the riskiness of small business loans, their rate is always several points above the long-term rate. According to the Federal Reserve, the average in early 2011 for small business loans was 8.4 percent for loans less than $100,000 and 7.6 percent for loans between $100,000 and $1 million. Peer to Peer (7-30%) Read more here: http://www.businessmoneytoday.com/articles-advice/2011/Peer-to-Peer-Loans-For-Small-Business.html loan sharks have been quoted by news sources as high as 300 - 600% APR, and pawn shops not being much better.- While credit cards are a good options for short term debt, with fees and rates that can push close to 30%, microloans are a better option for growing small businesses
- ACCION USA’s clients range from small home-based entrepreneurs to established storefront business ownersAlthough ACCION USA provides credit without discrimination to everyone who meets our lending criteria, we specialize in working with those who most often lack access to credit-women, immigrant, and minority business owners:89% repayment rate organization-wide38% women70% Minority35% home-basedMajor industries include: transportation, food and beverage, professional services, beauty salons, retail sales, wholesale, media, communications & entertainment, education Number % Industry 207 14% Transport 200 14% food/bev148 10% Prof Services 118 8% retail stores 103 7% beauty salon services 102 7% Retail sales 97 7% other services 96 7% construction/repair 87 6% Clothing/Material Prod 53 4% Wholesale 49 3% medical services 44 3% arts/crafts production 38 3% entertainment 29 2% media 24 2% jewelry 20 1% electronics 15 1% Cleaning 11 1% education 10 1% telecommunications 1451 100% Total Active of Known Industry
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- A credit score is a quick way to assess your credit-worthiness (should you get a loan or not?) While credit scores are important, remember that the information included in the credit report is what is most important. Scores will fluctuate up and down over time. The FICO score (which stands for Fair Isaac Corporation) is still the most widely used by lenders as a minimum cut off point to consider your application for financing. Depending on the bank, this minimum may range from 650 – 750, generally speaking. ACCION’s minimum FICO requirement is 575. The pie graph shows the following factors that affect your credit score. Payment History (35% of score)- this is the most important piece of your score. If you have late payments your score will drop dramatically. Always pay on time! Amounts Owed (30% of score)- this refers to the amount of available credit you have. You always want to try to have 65% available credit (meaning that you do not carry a balance that is over 35% of your limit). Your score drops dramatically if you are at the limit on all of your accounts (if you have used all your credit).Length of Credit History (15% of score)- the longer you have had a history, the better your score will be (taking into account the other pieces of the pie). Rule of thumb- never close your oldest account because you built your history with this account. Also don’t close the account you use all the time because this is also what you are currently using to build your credit history. Types of Credit Used (10% of score)- important to use multiple types of credit- both revolving and installment- shows that you can manage different types of credit.New Credit (10% of score)- opening too many accounts at once can hurt your score- it looks like you are in desperate need of credit and money. A new scoring model called VantageScore has been gaining momentum. VantageScore was created by the three major credit bureaus as an alternative to the FICO score. VantageScore credit scores run on a scale of 510 to 990 and offer a corresponding letter grade. Be Aware of this difference in scoring, as you might be receiving a 700 Vantage Score, which is more equivalent to high 500s/low 600s in FICO terms. VantageScore takes into account multiple aspects of your credit history, but weighs them differently than a FICO score does. Business credit reports and credit scores are completely separate from your personal credit report and credit scores. A business credit report is specific to a business's debt repayment and public records, such as bankruptcies or tax liens. You can start building your business credit by establishing your business as a separate entity, to separate your business credit profile from your personal credit profile (LLC or Corporation). As a small-business owner, personal credit is almost always considered when evaluating your ability to qualify for financing (even if in conjunction with a business credit profile).
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- The Boston Beer Company partnered with ACCION USA in 2008 to create Samuel Adams Brewing the American Dream, a program designed to provide food, beverage and hospitality businesses with access to:**read bullet points from power point**Client story:Award-winning chef Sandy Russo opened Lulu's Sweet Shop in February of 2010 with the innovative idea to use old-fashioned baking and mixing techniques to make cupcakes and other cake products. As a hard working single mom, Sandy’s business is crucial to help provide for her family, so when sales went down last summer, Sandy decided to make a change on her summer me...nu and offer cold slush and drinks and help boost up sales. As summer got closer and closer, Sandy struggled to find anyone who would lend her the capital needed to buy the ice machines needed for her business. About to lose all hope, Sandy found ACCION USA. At ACCION Sandy met her business development officer, Elizabeth, who worked with Sandy to help her learn more about her credit history and understand alternative, less expensive ways to finance her equipment purchases. Earlier this year, Sandy received a $2,000 loan from ACCION, which she used to purchase the ice machine and a package of six flavors as well as a chocolate tempering machine to speed up her production of cake pops and make it less labor intensive. These important steps helped Lulu's to gear up for the busy summer tourist season. Currently, Sandy has drawn much inspiration from the support she has received from the Brewing the American Dream program with ACCION USA & Samuel Adams, who have provided opportunities for catering and media exposure for Lulus.
- Russell Simmons, owner of Rush Communications Inc.Bobbi Brown, CEO of Bobbi Brown CosmeticsMillard Drexler, CEO of J CrewClient story: Natasha began working as an artist at fifteen, and her passion for design has been a journey ever since. From this early age, she knew she wanted to work in metal, and learned the art through a variety of sources, from university schooling in Wisconsin to field work in Nepal alongside Buddhist statuary makers. Natasha began her career in jewelry as a bench jeweler in New York, churning out rings and earrings by the hundreds and thousands for various designers. After gaining the necessary industry experience, Natasha decided to work independently, designing and creating her hand-fabricated jewelry collection in her own studio. Natasha now sets her own schedule and designs her own pieces, among them unique engagement rings, work for select galleries, and new wall pieces. Her entrepreneurial spirit and uniquely-crafted pieces have brought Natasha nationwide success. She travels all over the country for jewelry and design shows, and her work is now displayed in galleries in multiple states. However, in early 2010, Natasha needed help straightening out her finances, but couldn’t get a traditional bank loan. One day after reading an article about the Tory Burch foundation, Natasha learned about ACCION USA and applied for a loan via their online platform. She was quickly approved for a loan of $5,000, and is now working closely with ACCION USA to get the business side of her artistic passion on track; she has been part of all the Tory Burch and Friends Mentoring events which have helped her business thrive. “I have been so impressed with the mentors at the events. Every single one of them has said something memorable to me that has inspired action in my business,” said Natasha. “I can see that they really care and want to help us succeed.”
- For Luis Zepeda Alvarez, a microloan paved the road to self-renewal. For over seven years, Luis has woken at 2:00 a.m. to begin delivering baked goods to delis and restaurants throughout New York. Although the streets are still dark, Luis doesn't mind the early start — it's a small price to pay for the independence that owning his own business provides.Luis's road to self-employment was not easy. Once unemployed and homeless, Luis's life changed when he found work making deliveries for a local bakery. His regular route included a morning stop at New York's World Trade Center, and on September 11, 2001, he made his usual 8:30 a.m. stop. Luis was walking to his second stop before the attacks; his truck, meanwhile, got lost in the rubble. Rather than face unemployment for a second time, Luis decided to begin his own delivery service. But Luis didn’t have the cash to buy a delivery van — and no bank would lend to him. AUSA recognized Luis’ entrepreneurial spirit and valued his experience enough to give him a loan to purchase his first truck.Luis's business has grown steadily ever since. He now runs three daily delivery routes and has hired other employees. Ten years ago, Luis was depending on spare change. Today, he relies on himself and is proud of the life he is leading, the future he is creating for his family, and the opportunities he is building for his business and community.
- Partnering with ACCION provides visibility beyond our active client base30,000 subscribe to our monthly newsletters > This includes a wide range of partners, funders but mostly entrepreneurs.Univision.com> we have partnered to provide spanish speaking entrepreneurs with monthly articles on financial education. We also have a weekly blog