COMMITTEE ON COMMUNITY AFFAIRS
MINUTES: March 15, 2004, 2:00 PM
IN ATTENDANCE:
COMMUNITY AFFAIRS COMMITTEE MEMBERS: Legislators Jose Alvarado, Chair, William Ryan, BOL Chairman. Staff: Barbara Arrington Dodds CEO: Ian Riley; Planning: Norma Drummond Others: Jill Stephens, Acción New York
ITEM FOR DISCUSSION:
Acción New York
With a quorum present, the meeting was opened by Leg. Alvarado. He welcomed Jill Stephens of Acción New York to discuss the organization.
Stephens: Acción New York is a non-profit organization that helps individuals and small business organizations that can’t access credit from banks. Acción provides start up loans and reports loan payments to the credit bureaus to establish credit. Largest micro credit lender on Eastern Coast in New York since 1991 part of a larger org called Acción International that started in the 1960’s in Bolivia and there are now 12 programs across the United States, over 5000 loans in past thirteen years and over 1000 people in their portfolio. They have been working in Westchester for the past two years and in the past 6 months working very hard here at a satellite office at the South Broadway BID in Yonkers and have a good relationship with Yonkers and White Plains BIDs. Acción offers different products—an individual business loan for established businesses (over 6 months) and can be up to $50,000; for start-ups (less than 3 months), up to $5,000; and between 3 and 6 months established up to $30,000 loan with a stronger credit. Also group loans—three to five business owners who can’t find a co-signer would guarantee each other’s loans. They also offer credit start assistance credits allowing individuals who don’t yet own a business to establish credit with a $500 unsecured loan. No co-signer, but the client needs to be working for one year. Credit assistance for people who have damaged credit to consolidate debt and re-establish credit. Terms for loans are three months to sixty months at rates of 11 to 16%--higher than regular rates but lower than this clientele would be able to get.
Ryan: Who provides the capital that is loaned out?
Stephens: Chase, Fleet and Banco Popular are the biggest offers Acción lending capital at a lower rate (7%) and that money is then loaned out. Also through private grants.
Ryan: So banks loan Acción and then Acción loans money at a higher rate to those with credit problems. Who makes the credit decisions on the credit worthiness of the applicants, Acción or the banks?
Stephens: Acción has its own internal policy and credit committee and for the larger loans the Board of Directors makes the decisions.
Ryan: Do these people have banking and financial backgrounds? What is your reserve for writeoffs?
Stephens: Between 5% to 30% is what we are allowed, 6% is our historic loan loss rate, currently we are at about 8%.
Alvarado: Is there any mentoring to make sure that the borrowers don’t default. Stephens: We have two technical assistance people on staff who sit with them at disbursement and give them a workshop on credit. We offer two credit seminars per month in English and in Spanish to our clients and anyone else in the communities. We offer assistance in setting up a bank partner, keeping records, etc. As a loan consultant I work with clients to get through the application process.
Alvarado: Some businesses, particularly restaurants and grocery stores in my district are really feeling it right now with the downturn of the economy—with their collateral is this client better for you?
Stephens: In terms of collateral we don’t often use equipment or inventory to secure the loans, we would try for the co-signer because that is a better security on the loan. South Broadway is a very typical area that we would work in and we have two restaurant clients that we work with and our clients range from home-based seamstresses, taxi-drivers, bodegas, very non-formal to formal businesses.
Ryan: What exactly is your role with Acción? What did you do before this?
Stephens: I’m a team leader for loan consultants in Westchester, the Bronx and upper Manhattan and I’m a loan consultant with clients. Before I was in the Peace Corps in the Dominican Republic.
Ryan: Looking at the financial summary going from 01 to 02, I noticed program services increased from $2 million to $2.7 million and then there are support services going from 190 to 268, what program services are offered to clients? Stephens: Technical assistance and outreach in the community. Basically we offer small business loans and the opportunity to establish credit.
Ryan: Are you working with White Plains BID?
Stephens: We work with grassroots marketing—with an organization or bank branch that is willing to work with us. It is really relationship marketing rather than advertising which we don’t have the money for. It’s a service that is really needed and we depend on work of mouth.
Leg. Alvarado said he will share the Acción information with other legislators and thanked Ms.Stephens for her presentation.
Norma Drummond: There is a local micro-credit organization called Westchester Housing Fund. It also provides small business loans and seminars. Kim Jacobs, executive director, may want to come in and give a presentation. They also offer individual development accounts that can be used for smaller goals like buying a car or a computer. It is a very varied program that is offered and their interest rates are better than 11 to 16%.
Ryan: How does Westchester Housing Fund raise their money?
They have local banks sitting on their board.
Legislator Alvarado said he will invite WHF to make a presentation.
Leg. Ryan made the motion to adjourn, seconded by Leg. Alvarado.
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