SAN FRANCISCO — Opportunity Fund, California’s leading nonprofit microfinance provider, announced that it has closed $27 million in funding, led by Charles Schwab Bank, with BBVA Compass and Mechanics Bank also participating in the round. The funding will enable Opportunity Fund to increase the number of loans available to small business owners, while driving economic growth throughout California. Opportunity Fund, which experienced more than 1.5x growth in loans provided to small businesses in the past fiscal year, will utilize the funding to issue approximately 2,800 loans in the coming year (FY17) — totaling $75 million in new investments in California’s small businesses.
“Opportunity Fund’s mission to help small businesses thrive is essential to driving economic prosperity across the nation,” said Michael Solomon, vice president of community development, Charles Schwab Bank. “This mission is core to our beliefs and we look forward to continuing to support Opportunity Fund in its efforts to give small businesses the resources they need to succeed.”
California is home to 3.6 million small businesses. But many of these businesses lack access to traditional sources of funding or fall victim to predatory lenders, often resulting in accrued debt that small business owners can never repay. In a recent report by Opportunity Fund, the nonprofit lender explained that when small businesses are unable to obtain traditional credit from regulated lenders, they often turn to predatory “alternative” lenders — mostly unregulated — where the average alternative loan for small business owners that participated in the survey carried an annual percentage rate (APR) of 94 percent.
Opportunity Fund expands access to affordable, responsible credit by providing entrepreneurs who are unable to obtain it from banks and other responsible lenders with small amounts of capital, along with advising services. Since 1994, Opportunity Fund has provided more than $164 million in loans to entrepreneurs throughout California, which now generates more than $257 million in annual economic activity through new spending, wages and tax revenues. On average, every dollar Opportunity Fund invests in a small business generates two dollars in annual economic activity. The average loan is $20,000, and the businesses it invests in typically have fewer than five employees and annual revenues under $1 million.
“Small business owners simply don’t have equal access to healthy funding sources and the necessary resources to help them grow their businesses. Our goal is to change that,” said Eric Weaver, CEO and founder, Opportunity Fund. “This funding round enables us to continue to meet the needs of California’s entrepreneurs, which translates to more loans, more jobs created and ultimately a stronger economy.”
Opportunity Fund projects that the funding will help create or retain more than 8,000 jobs and generate $150 million in new economic activity statewide — spurred by new wages, spending and tax revenues as business owners make new investments with the loans provided by Opportunity Fund. Opportunity Fund’s business model combines earned revenue with philanthropy to deploy the loan capital raised in this recent funding round. Every $1 contributed by private philanthropists, foundations and corporate donors deploys $5 in new loans into the small business community. Through earned revenue and contributions from philanthropists, Opportunity Fund will also invest in technology and people.