How We Work
Since 1994, Opportunity Fund has deployed over $1 billion into the community, including over $500 million lent to thousands of underserved entrepreneurs. Most are low-income, women, and people of color. Many were first turned down by traditional lenders, or did not feel welcome to apply to them. Yet, 95% of our borrowers run successful businesses, and pay us back in full, with interest.
So how do we do it?
It begins with what our founder, Eric Weaver, calls Affirmative Marketing. Driven by our mission to enhance economic opportunity for all, we actively seek out hard-working small business owners neglected by other lenders, that are:
- From low-income households or communities
- Seeking microloans
- People of color and/or recent immigrants
- In industries considered “undesirable” or risky, such as swap meet vendors, child care and elder care providers, food trucks and restaurants
- Credit-challenged or credit invisible.
Without our loans, many of our clients would struggle or turn to alternative predatory lenders, paying exorbitant rates and fees.
Feet on the Street
Acquiring our preferred customers in a cost-effective manner is not easy. Our best results and most of our business comes through working closely with a variety of partners who have “feet on the street” in these communities, whom they go to for advice, equipment, and other services. Key referral sources for us include:
- Community partners, such as the California Hispanic Chamber of Commerce, Business Source LA, the Fresno Metro Black Chamber of Commerce and Nevada Business Opportunity Fund
- Equipment vendors, such as food truck manufacturers
- Financial partners, including LendingClub and many leading banking institutions.
Our approach to qualifying our borrowers is unique, and carefully balances traditional financial considerations against our mission imperative to assist underserved and low-income applicants. Our underwriting criteria includes:
- Business strength (years in business, revenue, profitability, reputation/ quality, etc.)
- Personal financials (FICO, savings, collateral, credit of cosigners, etc.)
- Character (references, challenges overcome, etc.)
- Community need for the product or service.
Managing Our Bottom Line
To keep our loans affordable, we keep a close eye on our operating expenses, from rent and marketing to staffing levels and salaries. We seek out funding partners who sometimes help subsidize our loans generally or to specific underserved groups.
If a client falls behind on payments, our loan consultants work with him or her cooperatively to help improve the business and/or restructure the loan. This stands in stark contrast to many traditional lenders, which typically seek to collect aggressively or close out the loan altogether.
Despite these efforts, the interest and fee revenue from our smaller loans does not cover their full costs, including occasional defaults. To address this shortfall, we get additional funding from foundations, corporate donors, fundraising events and individual donors.
We also sell performing loans to other lenders to replenish our capital and enable new loans.
“What Gets Measured Gets Managed” – Pearl Zhu, Digital Maturity
The final step in our process is measurement – documenting the impact our loans are having on our clients’ businesses and in their communities. In several follow up studies, we’ve found that most of our clients have increased sales, profits and employment. They are surviving at a higher rate than small businesses overall and bringing thousands of jobs and millions of dollars of spending to their local economies.