BusinessReport.com

As a young man, Yancy McGuffery worked weekends and holidays in his father’s trucking business. Today, he owns YD’s Trucking on Winbourne Avenue. Yancy hauls sand, gravel and asphalt to and from construction sites in his dump truck while his wife Angela helps with the paperwork.

But it’s been tough keeping the business running. McGuffery had some tax problems several years ago, which tends to scare off the traditional banks. So to get operating capital, he’s had to pay extremely high rates to a local finance company.

His daughter discovered the Seedco Financial Baton Rouge Small Business Loan Fund through the Small Business Administration. The local financial pros who administer the fund were willing to look past McGuffery’s IRS issues to focus on his nearly 20 years of experience in trucking. They decided he was a good risk and loaned him $51,000, which allows him to pay off old debts, make some truck repairs and start looking toward the future.

“They gave me a chance at a 6% interest rate, where everybody else was giving me a chance at a 36% rate, which is not really giving me a chance,” McGuffery says.

The Small Business Loan Fund provides low-interest loans of $5,000 to $150,000 with flexible repayment plans to businesses that might have trouble getting other types of financing, particularly women- and minority-owned companies. To qualify, a business has to be based in East Baton Rouge Parish and have less than 50 employees. YD’s Trucking received one of the first four loans in March.

The loan fund was started with $1.5 million from Seedco Financial, a national nonprofit community development organization, and almost $1 million from seven local financial institutions known as the Baton Rouge Bankers Round Table: Capital One, Liberty, Omni, Regions and Whitney banks, and Louisiana Capitol and Neighbors federal credit unions. The city-parish provided $500,000 in loan-loss reserve and operating support, and Entergy kicked in $50,000.

Mayor Kip Holden assembled the round table as a task force to look for ways to support local entrepreneurs, including those who might have fled here after hurricanes Katrina and Rita in 2005, says Cheri Morial Ausberry of Capital One, who chairs the fund’s advisory board.

Ausberry says most comparable cities in the region already had a similar fund. Of the handful of firms that responded to the board’s request for proposals, Seedco Financial got the bid, partly because it already had a regional presence in New Orleans and partly because of their holistic approach.

“They didn’t just do loans,” Ausberry says. “We didn’t want to give businesses a loan, or give them false hopes. We wanted to give them the tools for their businesses to survive, thrive and grow. … It’s not a grant. Benchmarks have to be met.”

“We don’t want to sort of say, ‘Here’s your check. Good luck,’” says Robin Barnes, senior vice president with Seedco Financial. “A loan is not always a good thing.”

Seedco Financial and its partners, including the SBA and the small business development centers at LSU and Southern University, help applicants get their books and their business plans together. Even companies that don’t end up getting one of the loans can benefit from the technical assistance; hopefully, the ones that do will prosper and graduate to a relationship with a traditional lender.

So far, the program has drawn significant interest from companies with less than five employees, largely from north Baton Rouge, including florists, hairdressers, housekeepers, landscapers and home-based businesses. The typical loan ranges from 7% to 9% interest, with a possible discount if the recipient agrees to direct debit, for a term of three to five years. Specifics vary depending on the business and its needs, Barnes says.

Holden has issued a challenge for more financial institutions to participate in the program. Organizers hope to raise another $2 million in loan capital with the goal of financing 100 businesses in three years. Participating can help a lender meet federal Community Reinvestment Act requirements, but Ausberry hopes they don’t look at it that way.

“It’s just the right thing to do if you want businesses to survive and thrive,” she says. “Small businesses are the backbone of the economy.”