MCCD, other growing nonprofit lender-advisers stimulate many tiny businesses

Alan Estevez is a professional guitarist and repairman who also sells high-end equipment from a 900-square-foot shop in northeast Minneapolis.

He's having the breakout sales year he has dreamed about since he moved his world headquarters from his south Minneapolis apartment to retail space in 2012.

"With any luck, I will break $200,000 in sales this year," Estevez said.

But that's almost twice what he made last year — not enough to pay himself a salary or own a car, but progress. He lives off the guitar repairs and occasional performances.

"But I'm going to hire one or two [musicians] to help with retail, so I can focus on marketing and repair work," he said. "Sometimes the work piles up when I take out the trash and do other things in the store."

Estevez's Diablo Amps (www.eldiabloamps.com) wouldn't still be in business were it not for the Metropolitan Consortium of Community Developers (MCCD), a neighborhood-business advocate, business adviser and small lender to about 300 tiny businesses.

MCCD has helped Estevez since 2012 with four small loans that now have a total balance of about $33,000. Estevez, in turn, has made his payments on time.

And that's the way it's supposed to work.

Estevez, 45, an immigrant who graduated from Minnesota State University, Moorhead, also is the embodiment of a few thousand, small, struggling entrepreneurs in the Twin Cities who are not bankable for even the smallest of commercial lenders because they would not be profitable enough. They are assisted by about a dozen nonprofit and other lenders who are chartered to advise and provide small loans to help tiny operations grow, mostly in the corners of the core city or frayed edges of first-ring suburbs.

In fact, the larger lenders such as Wells Fargo, U.S. Bank and Great Western Bank, as well as foundations and other donors, have committed millions in capital to increase the capacity of outfits such as MCCD, Neighborhood Development Center, Community Reinvestment Fund, Nonprofit Assistance Fund and other such outfits. They make interest-bearing loans, are chartered by the U.S. Department of the Treasury as Community Financial Development Institutions (CDFI) and get some capital from a Treasury fund.

Yet, by design, they are not burdened by some of the regulations of federally insured commercial lenders and also provide free business counseling.

The idea is to support business developers who can help fledgling companies grow into bigger employers, profitable commercial bank borrowers and taxpayers. Banks that provide low-cost capital to the nonprofit lenders also get "Community Reinvestment Act" credit from bank regulators for spreading credit to needy borrowers.

"Nonprofit lenders are able to spend more time with organizations during the loan application and approval process than commercial banks do because that additional support and guidance is a core part of our mission," Barr said. "We measure success by seeing the management and financial stability and success of our clients as much as by counting the number and amount of loans we make. We've been fortunate to receive more capital from banks and foundations to support the loan growth. The capital investors are interested in having an impact in the community."

Great Western Bank of South Dakota moved into the Twin Cities by buying a small bank. It also provided about $500,000 in capital to MCCD, which has grown its loan portfolio to $6 million and 300 borrowers. The average loan is about $20,000. Great Western is the No. 3 financial supporter of MCCD behind Wells Fargo and U.S. Bank.

Hall, a former Sunrise banker, said he loves working with clients such as Estevez. Sometimes the advice may be to an aspiring entrepreneur to just get a job.

"I get excited about people such as Alan who are so passionate about what they're doing," Hall said. "They're not talking about getting rich. That's the wrong reason to start a business."

Hall's job was to vet, guide and help finance Estevez. A decade ago, Estevez was working as a marketer in New York City for an energy drink company on Wall Street.

Estevez lost his job when Wall Street swooned, and he couldn't find another job amid the layoffs of the Great Recession. A single parent, he started fixing guitars in his Brooklyn apartment. He moved to Minneapolis in 2010 to be closer to his mom and sister. He fixed guitars at home.

Then Estevez found MCCD. He opened a tiny retail space in Uptown. In 2015, he moved into larger space in Northeast.

Estevez has had seven months of sales that have doubled the year-before figures. He's generating enough cash to hire another employee so he can focus on marketing, including selling high-end guitars, and fixing equipment.

"I recently told Alan that all of his work up to this point was about proving himself and his concept," Hall said.

"He is now at a new 'launching point' almost like starting anew. He needs again to outline the vision, set goals and make a plan, consolidate and recapitalize the [expanding] business," he said. "But this time it will be easier, and we'll be working at a different scale thanks to the track record and foundation he has behind him.''