Q&A
Discussion on interest rates and credit scores for small business loans
1:25:21
·
3 min
Council Member Paladino and Commissioner Kim discuss the impact of not using credit scores for small business loans. Kim explains how this approach allows more businesses to access funding and support.
- Community Development Financial Institutions (CDFIs) evaluate businesses based on their overall financial situation rather than just credit scores
- The program has helped startups and minority/women-owned businesses that were previously turned down by traditional lenders
- An example of Booney Coffee is given to illustrate how the program supports business growth and creates economic ripple effects
Vickie Paladino
1:25:21
I wanna go back to what you said here about the small this is really very interesting.
1:25:27
About the the interest rates for small businesses thought that this is huge, that you're not doing the credit you're not doing
Kevin Kim
1:25:36
minimum credit scores.
1:25:38
Yes.
1:25:38
So that's huge because, you know, you could be a business that is let's say, for just example, Your expenses are 5000.
1:25:45
Your income is 10,000.
1:25:47
So every month, you're making 5000 a month.
1:25:49
Along the way, while you're building up your business.
1:25:52
While you had to buy that kitchen equipment, whatever it was, you maybe you missed a credit card payment, you know, minimum payment of $100 in there.
1:25:59
And all these factors start hitting your credit score.
1:26:02
So if you went to a bank with those numbers and said, hey, look, I'm positive.
1:26:06
I'm cash flow positive, but they're like, yeah, but your credit score is like, 600 or maybe that's 6 or 500.
1:26:12
So sorry, you don't apply.
1:26:13
And so right there, without even having that discussion, they were knocked out.
1:26:17
But in this fun, Because we partnered with 8 Community Development Financial Institutions, CDFI, so we're nonprofit lenders whose mission is to make sure the money gets deployed to deserving businesses.
1:26:29
They would sit down with the business owner and not just not worry.
1:26:34
There's credit score information that might be important.
1:26:37
But it wasn't based on that one cutoff number.
1:26:39
They're able to then look at the particular business situation and say, look.
1:26:43
Wow.
1:26:43
You're making 5000 a month.
1:26:45
And this loan repayment would require you to pay $300 a month or 400.
1:26:50
We think you can do it, and we're gonna support you.
1:26:52
And by the way, we're gonna connect SBS to you because they're gonna provide you with the compliance adviser, the small business advocate, other types of technical assistance programming to make sure you can survive in your business, thrive in your business, and repay the loan.
1:27:08
Right?
1:27:08
At the end of the day, it's still a loan.
1:27:10
But they wanted to create a an environment and a setup where they had every support needed to be able to successfully participate in the program.
1:27:20
And so that's why the start ups 15% of them.
1:27:23
Right?
1:27:23
That's over 100 businesses.
1:27:25
There's you know, all these MWDs that have been turned down multiple times from traditional lenders, and they were now able to hire people.
1:27:33
I used that Booney Coffee Example, they're so unique because not only are they able to expand to another cafe, but they're able to use this money to create the roastery at self.
1:27:44
Right?
1:27:44
So now they're on the manufacturing side.
1:27:47
And what's great about that is there's so many small mom and pop independent coffee shops all around the city And it's hard for them to compete against sometimes the Starbucks of the world.
1:27:56
Right?
1:27:58
I was gonna not name any particular corporation, but one of the larger chain corporations but now they have a unique advantage because you've got this mom and pop roastery that's creating Ethiopian taking Ethiopian beans and creating unique flavors and that these small mom and pops can buy from them were probably offered to white label their own coffee beans as well.
1:28:20
And now you've got an economy upon an economy.
1:28:22
And so this is the kind of leveraging of the money, the smaller dollar amounts that we wanna maximize for economic growth.