Back from the brink of closure, the Pacoima Development Federal Credit Union has launched a new microloan program for entrepreneurs and small businesses located in Pacoima and the San Fernando Valley.
Business owners with 250 or fewer employees can apply for loans of up to $50,000, which typically carry interest rates of around 9 percent. The credit union expects to lend out up to $500,000 over the next few months, according to spokeswoman Lisa Winkle.
“We have an incredible entrepreneur community in the San Fernando Valley and particularly in the northeast San Fernando Valley,” board member Roberto Barragan said. “They need capital.”
The credit union – a certified Community Development Financial Institution with around 2,000 members and assets of more than $4 million – was on the verge of shuttering last month. It was rescued by the Valley Economic Alliance, headquartered in Sherman Oaks, which announced Sept. 21 that it had stepped in as its new financial sponsor.
The alliance has committed $50,000 to support the credit union.
The credit union serves as an alternative to the payday and online lenders that tend to target entrepreneurs in financially underserved areas like the northeast San Fernando Valley, Barragan explained. Following the Great Recession, many businesses have had trouble securing loans of less than $100,000 from banks or the Small Business Administration, leaving them vulnerable to predatory lenders.
“Those lenders are choking off these businesses," Barragan said. “The credit union can be the lender of choice for small businesses ... that don’t want to pay 50 percent interest rates on loans they have to pay back in six months.”