The Equity Factor

Loan Fund Proving Immigrants Are No Risky Business

One year in, no missed payments.

Plaza Adelante, headquarters of the Mission Economic Development Agency, in San Francisco (Photo by Oscar Perry Abello)

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Zenaida Merlin and Luis Estrada have been together almost 28 years. Originally from El Salvador, the married couple first moved to the U.S. more than 15 years ago. Like many Latin American immigrants before and after them, they ended up in San Francisco’s Mission District.

In many ways, it felt like home, Estrada says. “It was also easier for transportation,” he adds. “In the beginning when we came and didn’t know anything about living in this country, it was helpful.”

Estrada, who trained as a chef in El Salvador, found work in the restaurant industry. “When you come in this country, and nobody knows you, you start at the bottom,” he remembers.

About six years ago, with a two-year-old son at home, the couple began a catering business, called D’Maize, making and selling food out of their home kitchen. Estrada spent half his day at his other job, the other half working on the catering business with Merlin.

“We were happy,” he says. “I did that for around a year. I felt proud.”

D’Maize eventually outgrew their home and they moved into La Cocina, a Mission District kitchen incubator that focuses on helping Latino-owned businesses grow. Over the past six years, La Cocina has helped 22 businesses move from home-based or curbside into brick-and-mortar locations. La Cocina gives businesses five years to grow in its space. D’Maize only needed two.

“That was the time when they said you’re big enough,” Estrada says. “It was a little scary, but it was a time to make a hard decision.”

Looking back, it seems like it was all meant to be. The owners of an historic building on 24th Street were looking for another local Latino family establishment to rent out the space in the rapidly gentrifying neighborhood. And the 40-year-old Mission Economic Development Agency (MEDA) had just launched a new revolving loan fund for small, local businesses in the San Francisco area. D’Maize became one of MEDA’s early borrowers, with an $80,000 loan to build out their new restaurant space. D’Maize Restaurant celebrated its grand opening in May.

It’s been a year since MEDA launched its Adelante Fund for small business lending. In that time, they’ve made 25 loans, totaling more than $700,000. Of their borrowers, 87 percent are Latino-owned businesses, and a majority are in food and beverage. There are another 20 potential borrowers on their radar.

With decades of experience helping Latino entrepreneurs (including Merlin and Estrada) to start and grow businesses in and around San Francisco and the Mission District, MEDA designed the Adelante Fund to serve immigrants in the region. They don’t ask for collateral, and don’t have a credit score minimum (although they do look at credit history). Bank lenders typically also want to see tax returns and income statements, which many immigrant-owned businesses don’t quite have.

“Many of our businesses are cash-only businesses, often without bank accounts,” says Diana Matei-Golopenta, who manages the Adelante Fund at MEDA. Starting a business bank account might be a condition of getting a loan, she adds, but lack of one won’t be a reason for MEDA to say no.

“We never decline someone outright, we just refer them to our other services first. We want to see that they have the revenue to make the monthly payments,” Matei-Golopenta says. It might sound risky, but in the Adelante Fund’s first year, it hasn’t had a missed payment yet.

In some cases, she adds, immigrant business owners in the Bay Area actually have excellent credit, having operated businesses and even paid taxes for 20 or 30 years, but the credit scores are linked to individual tax identification numbers (ITNs), which the IRS issues to taxpayers who don’t have a social security number. In MEDA’s experience, banks have been more likely to avoid lending to anyone without a social security number.

That’s a problem in the rapidly gentrifying Mission District, which not too long ago provided a great place for Merlin and Estrada to land, coming from El Salvador.

“It’s not even close to the Mission we saw when we came,” Estrada says. “But the Mission isn’t made by the buildings, the Mission is not made by visitors walking around, it’s the people who make the Mission District.”

One of MEDA’s goals for the Adelante Fund was to make sure the Latino community that made the Mission District such a sought-after location in the first place has a reason to stick around — either for services and products provided by immigrant-owned businesses, or for the jobs.

“When we give loans to businesses, we’re looking for, ‘do they have a model to create jobs and wealth for the underserved community,’” says MEDA’s Christopher Gil.

In D’Maize’s case, the new space allowed them to add six employees immediately, and they’re now up to 22. As a small business, Estrada explains, they still typically start off employees at minimum wage ($13 an hour in San Francisco), but they increase wages the longer an employee stays with them. A few of their employees have been around since they were based at La Cocina. They’ll be adding more with the addition of their second food truck.

It’s only getting harder to keep the Mission District’s Latino ties intact. Out of more than 7,000 clients that MEDA sees a year, for business coaching, financial literacy classes, support for commercial lease negotiation, and other programming, 32 percent now live outside of San Francisco entirely. Even as immigrants are boosting the economy in U.S. cities, they’re being priced out.

“Many still come back here because where they end up there are not culturally relevant services for Latino entrepreneurs,” says Gil. “It’s easy access to us on the BART.”

The Equity Factor is made possible with the support of the Surdna Foundation.

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Oscar is Next City's senior economic justice correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha and Fast Company.

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Tags: jobssan franciscoincome inequalitygentrification

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