Contact Us    Locations    11/18/2008

Unsung Lending Resources

Erwin Reeves, Vice President
Community Development Manager

The Mechanics Bank Community Development Corporation: Unsung Resource For Small Businesses

Every small business owner knows that over 50% of small businesses fail in the first year and 95% fail within the first five years. But do they know why?

Some failures can be traced to inexperience or poor management. But experts say that many small businesses lack only one crucial ingredient for success: capital.

These are the businesses that Erwin Reeves, Chief Operating Officer of The Mechanics Bank Community Development Corporation (TMBCDC,) is out to find.

“We formed the TMBCDC specifically so that we would be able to reach a little further for our small business clients,” Reeves said. “By creating a certified Community Development Entity that is a wholly-owned subsidiary of the bank, we can offer loan features that are not traditionally available—and at market rates. In some cases, it can be the difference between business success or failure.”

The TMBCDC, formed in July 2003 to enhance The Mechanic Bank’s investments under the Community Reinvestment Act, was awarded a $26 million allocation in 2004 for the federal New Markets Tax Credit Program from the Federal Community Development Financial Institutions Fund (CDFI Fund). The Mechanics Bank TMBCDC allocation was designated for use in providing loans, commercial financing, real estate financing (retail, industrial, office space, for sale housing and community facilities), and provide financial counseling to qualifying businesses in low income census tracts in Contra Costa, Alameda and San Francisco counties. The Mechanics Bank provides investment capital to the TMBCDC; in return the TMBCDC gives tax credits back to the bank.

“The most important thing we can offer borrowers is flexibility,” Reeves said. “Let’s say you want to finance the acquisition of a building. A typical commercial lender will require a 25-year amortization. We have the flexibility to extend the term of the loan to 30 years—lowering the payments and freeing up cash flow for the business.”

Reeves says that borrowers often have a misconception that TMBCDC offers lower-than-market interest rates. That’s usually not the case. But it’s also not a reason to assume they can’t help.

“What borrowers need to focus on is taking control of their businesses,” Reeves says. “We provide ways they can lower their payments and other flexible credit features—which is as important as the rate they pay.”

There are a variety of ways the TMBCDC can meet a borrower’s cash flow goals, Reeves says, among them extending the term of the loan, offering a longer than standard interest-only loan period, and reducing fees.

But what if the borrower can’t qualify?

“A traditional bank is required to adhere to fairly strict credit standards,” Reeves said. “But we can be more flexible. For example, the TMBCDC also can accept a higher loan to value ratio or lower than standard debt service coverage depending on the associated risk. So if a business has been turned down elsewhere, they may still qualify with us.”

To extend its community reach, TMBCDC is setting up working relationships with other community based organizations like Oakland Business Development Corporation (OBDC). OBDC provides financing and managerial assistance to qualifying small businesses in Alameda and Contra Costa counties.

“The OBDC is a great partner for us; they know the small business community within the designated service area thoroughly and will be able to identify appropriate loan candidates,” Reeves said.

If you know of a small business that needs capital, and is located in a low or moderate income area of Alameda, Contra Costa or San Francisco counties, The Mechanics Bank TMBCDC would welcome their inquiries. For more information contact Erwin Reeves (Erwin_Reeves@mechbank.com)

The Mechanics Bank Community Development Corporation is a wholly-owned subsidiary of The Mechanics Bank. Both are headquartered in Richmond, California.

©2008 Mechanics Bank. All rights reserved