Jamie Beasley, Latino Program Director, Mountain BizWorks
Since 2007, Jamie Beasley has helped entrepreneurs through Mountain BizWorks, where he currently serves as Latino program director. The Asheville-based organization is a certified non-profit community development financial institution (CDFI). Mountain BizWorks’ mission is to help small businesses succeed in Western North Carolina, with an emphasis on lending, consulting, training and investing.
Among other responsibilities, Beasley is a microloan fund manager. He manages a portfolio of loans of $25,000 and less which Mountain BizWorks has made to regional businesses and entrepreneurs.
In these excerpts from a May 2013 interview, Beasley shares insights about how CDFIs like Mountain BizWorks assist entrepreneurial start-ups and existing businesses, and also discusses some unique challenges and opportunities facing the Latino entrepreneur community.
Q: Can you briefly describe the different prongs of CDFI – lending, training and investment?
Beasley: There are a lot of organizations like us around the country. Most people know our industry on the mortgage side, making home loans available for low-income people. Lending money to people who can’t access bank financing is, in short, what we do. At Mountain BizWorks, we lend exclusively to businesses and to potential business owners. Our target market is defined as where banks stop. We do a whole lot of work with banks. When they have a near miss on a loan, so to speak, they often recommend that their customers come to Mountain BizWorks. We charge a little more interest than the banking industry to take additional risks so that more people can create jobs, increase their income and build middle-class assets.
We’re here for the cause of helping people toward success. Burdening them with 35 percent credit card debt is not going to help them build their assets and stabilize in this economy. We charge 8 percent to 12 percent interest on all of our loans, and then we decrease our risk by investing in the entrepreneurs. For example, if a loan client needs a web site, we connect them with a web site firm in town.
For investors, we offer a guaranteed (but not insured) 1 percent, 2 percent or 3 percent return, and they know they are investing in local businesses. Our default rate is about 1 percent on our loans, which is less than the banks, even though we take additional risks. We feel we give entrepreneurs what they need so that they can pay us back.
Lending and learning are our chief areas of focus. For the Latino community, we really work with the entrepreneurs to understand what needs to happen to get a loan approved, and we look at what learning opportunities we need to provide to keep folks successful. For example, we might have a class in Spanish on how to write a professional estimate because there are many people doing service work that involves preparing an estimate. We help our clients overcome any language and technology barriers.
Q: What would a typical work day be like for you?
Beasley: I’m working on about nine deals right now. For half of them, the ball is in the court of the borrower to provide some sort of information. For example, in one case, we got into the loan approval process for a client, and pulled a credit report, and there were about 15 late payments on a mortgage. Any bank would just immediately decline the loan application, but what we do is say, “We need to know more about this. What is really going on?” In this client’s situation, he had been in business for nine years and hit a very hard patch one year during the worst of the recession. He had made the past 36 payments in a row without being late once, but the credit report didn’t reflect the timing of that very well. So I asked the client to get a letter from his mortgage lender saying he did not have any late payments for the past three years, so that I can then continue helping him with his loan application. Of the nine open cases, four or five of them have been given a pretty hard assignment that most won’t be able to complete. Many disappear at that point because they feel they cannot get past an insurmountable obstacle. For the other four deals, I’m working on gathering paperwork and trying to get the deals done.
In the past 18 months, we’ve gotten about 20 or 25 deals done for the Spanish-speaking population. I’m managing those relationships ongoing. All are in good standing. All are paying today. But if there is any kind of disruption, I reach out to the client and try to resolve the problem. One of the differences between us and a bank is our flexibility. If certain months are particularly hard for a business, for example, we can consider taking interest-only payments for two months and then bumping up the payments during the business’ better months.
And when I’m not working on lending, I am helping my colleague with our Spanish-language classroom and coaching services. About half of our clients are seeking loans, and the other half of businesses are looking for education and training of some kind.
Q: What are some unique needs of the Latino entrepreneurial community?
Beasley: We spend a lot of our days thinking about that question as the needs shift and change. When we say “Latino,” we are referring to a community that represents 20 or 22 different countries. In our region, the community is predominantly Mexican, but when it comes to Mexico, you’ve got folks who just got here, people who have been here for generations, individuals who have finance degrees from Mexican universities, and others who have been working on a farm since third grade, when they dropped out of school. Mixed in with that you have people with low education and high English skills, and those with high education and low English skills. There are those with informal-but-profitable businesses, and then you’ve got people with formalized-but-unprofitable businesses. A lot of people are looking for alternatives to jobs they don’t like. Some have an inability to find work due to immigration status, and starting a business is an option. And it is an option. When it comes to the barriers and paperwork and registrations and licenses you need to get a business up and running, an undocumented immigrant can, in fact, do every step legitimately.
Studies show there has been a tremendous increase in business starts in the immigrant population over the past 20 years. Minorities were responsible for 30 percent of U.S. start-ups in 2010. In North Carolina, Hispanic-owned businesses employed 34,000 and generated $4.2 billion in cash receipts. This economic crisis we’ve been facing is real, and one major part of the solution is the Latino immigrant community. Putting a damper on that possibility is not really an option for people that are serious about our economy.
That brings us back to challenges. Our clients often need help navigating all of the paperwork. They need to know who to deal with at the country, city and state level, what to sign, etc. We walk them through the process. For a reasonable fee of about $25/hour, we go with them to the various offices and help them get their license and start their incorporation paperwork, for example. We understand the concerns and reservations of the Latino community, and we approach the question of how to formalize their business through their eyes.
Surprisingly, language is not the biggest barrier. People want to reach their target market, and they are grabbing at opportunities to learn English fiercely. There is no lack of motivation or desire among Latino businesspeople to learn English, and many are in class all night or all morning to make it better. All of the local English as a second language (ESL) classes have waiting lists.
Q: What are some issues related to access to capital in the Latino entrepreneur community?
Beasley: A lot of people raise capital informally by getting friends and family and neighbors to give them money. Others borrow money, but there is a real aversion to borrowing money. There is a fear of debt culturally. Part of our opportunity here is to help our Latino clients understand the upside to borrowing money, the potential gain for your future and your family if you could get a little more capital through loans instead of only using savings, for example.
Q: Can you share your observations on debt vs. equity financing for some of your clients?
Beasley: The hardest part of my job is telling someone, “No.” For every six applicants from the Spanish-speaking population, we end up having to say “no” to five. But “no” often comes with caveats such as, “If you could do these three things, we might be able to make this work.” But what can be hardest for me is that many times, I would bet on the business and I would bet on the entrepreneur. The character of the entrepreneur and the logic of the business both work, but the model and the cash flow projections simply don’t support debt financing. They are going to make money, but they’re not going to make money for a while. A debt payment, right now, when you aren’t making enough money, is not the model that’s going to lead you to success. Instead, you need someone who says, “Here is the money. Give me a chunk of the business (equity), and you can pay me after three years when you’re profitable,” or whatever other terms you want to work out. It can be structured very loosely.
Q: What are some common traits you have seen in successful entrepreneurial start-ups?
Beasley: First and foremost, they have the support of their spouse or significant other. This is very important because the entrepreneur is going to be working incredibly hard, and it’s almost impossible to keep going with your start-up if you don’t have support on the home front. You can’t fight battles all day at work and then fight another battle at home. Successful start-up owners also have the ability to make the transition from “doer” to business manager. A landscaper may never lay another rock himself, for example. Instead, he has to focus on planning, communicating with clients and ensuring the invoices go out correctly. They have to see the world differently.
