Throughout LA County, and especially in economically disadvantaged communities, there is a need for secure and affordable lending products geared towards businesses. Given limited employment opportunities with livable and family-sustaining wages in economically disadvantaged communities, it is often difficult to start a new business. Those who do take the leap to create their own entrepreneurial businesses often do not have culturally- and linguistically-appropriate business development support, including access to capital from traditional lending sources. To help support local businesses in reaching their full potential, today the Board of Supervisors approved a motion authored by Los Angeles County Supervisor Hilda L. Solis, and co-authored by Supervisor Mark Ridley-Thomas, that begins the process to launch a Countywide microloan program.
“Far too often, high-cost loans often trap low-income communities and communities of color in an unrelenting cycle of debt. Today, LA County is beginning the process to provide a viable alternative,” said Supervisor Solis. “By providing affordable lending options, LA County is directly investing in underserved communities that have nearly limitless potential for economic growth. A small affordable loan supports entrepreneurs, their families, and their communities, without entangling them in predatory debt.”
Today’s motion instructs the Community Development Commission (CDC), County Departments, and the Center for Strategic Partnerships to research, design, and present recommendations and an implementation plan for a Countywide microloan program. The microloan program will be inclusive and accessible to existing and new entrepreneurs, with a special focus on traditionally underserved communities. The amount of the microloans, and who would be able to access them, will be developed through a stakeholder-driven process, including philanthropy, the private corporate sector, community-based organizations, and mission-driven financial institutions with experience working with underserved communities that face barriers to accessing capital.
“Microloans have the potential to be an effective new addition to our tool box for supporting Los Angeles County’s growing entrepreneurial community,” said Supervisor Mark Ridley-Thomas, who coauthored the motion. “This tool can help steer people away from predatory lending and also provide seed funding for starting – and potentially sustaining – small businesses.”
Microloans, as a tool within a broader sustainable economic development strategy, have the potential to help strengthen locally-owned and operated small businesses, improve economic opportunity for residents and businesses in surrounding communities, and increase the creation and retention of jobs. According to PACE, a local non-profit that administers a microloan program, businesses generated gross revenue of $188,000 for every $16,000 that PACE loaned them.
Today’s action is a result of a November 18, 2018 motion, also authored by Supervisor Solis, directing County Departments to develop a comprehensive County response to combat high-cost loans and create affordable alternatives, such as microloans.