SMALL BUSINESS LENDING

Microlending becoming big financial tool

Manuel Godino loads an oven with fresh empanadas at the San Francisco restaurant he opened with a $45,000 loan at 7.5 percent interest from Opportunity Fund.

SAN JOSE, Calif. — When Caitlin McShane looks down San Francisco’s Mission Street, she doesn’t see taco joints and bodegas bulging with ripe fruit. She sees sharks.

“Look over there — payday loans,” said the spokesman for San Jose-based Opportunity Fund, a San Francisco Bay Area-based microlending nonprofit organization that helps small businesses get off the ground or expand.

“And there’s a check-cashing place on the corner. There’s a pawnbroker, a loan office, and another payday loan place. People are getting into debt to loan sharks and even pawning their things to keep their businesses from going under. It’s a mess, and this is what we’re competing against.”

Sixteen years after making its first loan of $17,000 to a San Jose pet store, Opportunity Fund has become the country’s third-largest microlender and a star player in the burgeoning realm of microfinance.

Although microloans are more often associated with helping goat farmers in Uganda than food trucks in California, they’ve become an increasingly popular method of financing for small businesses.

Manuel Godino, a 47-year-old chef from Buenos Aires who came to the United States after Argentina’s currency crisis in 2001, is a beneficiary of the trend. After running his nascent empanada business out of rented kitchens, he got a $45,000 loan at 7.5 percent interest from Opportunity Fund, opened a small restaurant this summer in San Francisco, and has hired eight employees.

“I was able to show the lender that even though I had no credit, there was a big demand for my product,” he said. “I could never have done this or hired these workers if I hadn’t gotten that loan.”

With funding from foundations, individual donors, and banks themselves, microlenders have been able to help thousands of aspiring business owners who otherwise would be shut out or would have to take out high-interest loans.

San Francisco-based nonprofit microlender Kiva has mushroomed from its launch in an Ugandan village into a powerhouse, with 100 employees making $100 million annually in loans to groups and individuals in 60 countries. It began U.S. lending in 2009, partnering with Opportunity Fund and other microlenders around the country.

Matt Flannery, 34, Kiva’s chief executive officer and co-founder, said that despite its growth, microlending in the United States faces different challenges than it does overseas. For starters, getting a business up and running costs more and involves more red tape, he said. “These kinds of loans are really important,” he said, “and we need to make the system more efficient.”