The state Technology, Trade and Commerce Agency plans to open its first Orange County small business Financial Development Corp. in Santa Ana in November.
The new center, at 2323 N. Broadway, is set to offer state-backed guarantees on loans, bond financing and credit lines to small businesses.
Technology, Trade and Commerce Secretary Lon Hatamiya said the agency based its decision to open a development corporation office in OC on the county’s relatively low unemployment rate and high level of small-business activity.
New financial development corporation sites also were announced in Ontario and San Fernando Valley last week. A San Jose location also is planned. The new offices are the first the agency has opened in 15 years.
The nonprofit corporations target light manufacturing, smaller service sector firms and “mom ‘n’ pop” businesses, said Bruce Grogan, deputy secretary of the agency.
“The average business size of our loan clients typically is 10 employees or less,” he said.
There are two offices in Los Angeles and six in other parts of the state. The agency has no plans to set up any additional centers after the three announced this month.
“The centers provide loans to businesses that otherwise wouldn’t be able to get it from a commercial bank,” Grogan said.
“It’s not that these businesses have bad credit ratings or anything, it’s just that in many cases they are new and without much of an established credit history.”
When small-business owners run into problems qualifying for a loan from a bank, a bank may then seek a loan guarantee through a financial development corporation.
A 1998 University of California, Davis, study ranked priority areas in the state for these types of centers,putting Santa Ana second after San Jose and followed by Ontario and San Fernando Valley.
A San Jose location still is pending while the agency reviews applications there.
The UC Davis study looked at economic and social criteria and the number of small businesses within a 25-mile radius of potential sites.
It concluded a financial development corporation in Santa Ana potentially could serve about 70,000 businesses.
The corporations will guarantee up to 90% of a loan up to seven years at interest rates established by the bank and the borrower up to a maximum principal of $350,000.
The money may be used for any business need, including expansion into new facilities, purchasing new equipment, installing energy-efficient equipment or developing a new market.
The Santa Ana center will have a few staffers to begin with and will grow depending on how many loans it issues.
“The ability to move money and market aggressively is really the factor in deciding how big any center grows,” Grogan said. “And that growth largely is in terms of how many loan processors a center needs.”
The program has a loan-default rate of less than 2%, which Grogan said is better than commercial bank loan default rates.
The agency expects to help more than 730 small businesses acquire loans through its loan guarantee program in fiscal year 2001-02.
The 631 businesses that received guaranteed loans last year retained 9,500 jobs and created another 1,614 jobs, receiving a total of $80.8 million in loans through the agency.
The agency works with the U.S. Small Business Administration on the federal side, as well as local entities that provide counseling and business services for small businesses. n
