Small business loan program creates grant access

Over the course of about five months, dozens of Inland Northwest small business owners have received loans from Spokane-based Canopy Credit Union through an unconventional loan program that helps borrowers improve their credit and access grant funds.

The Credit Building Pilot Program, as it’s called, offers Small Business Resiliency Loans ranging from $500 to $25,000 to entrepreneurs who may otherwise face challenges accessing capital and building credit.

These aren’t ordinary loans, however.

When a Small Business Resiliency Loan is originated, grant funds equal to the total of the loan plus anticipated interest are deposited into a savings account under the borrower’s name. The loans carry a fixed rate of 4% and must have a final maturity date of Dec. 31, 2026.

“Even though it’s a loan, it’s also a grant,” says Ana Marie Caldwell, a technical adviser at Spokane-based nonprofit AHANA, which provides education, technical assistance, and outreach to all multiethnic and multicultural business owners and their communities.

Access to those grant funds, however, is restricted until the loan is paid off over the course of at least 12 months, because the primary objective is to help small businesses and entrepreneurs establish and improve credit, as the program’s name suggests.

Last year, GoWest Foundation, which works with credit unions and community organizations throughout six states, was awarded $9 million in federal COVID-19-relief funds from the Washington State Department of Commerce to create and implement the program.

This summer, Canopy was one of 13 credit unions across the state to volunteer and be selected to serve as lenders in the program.

“It’s a very unique collaboration between nonprofits, small businesses, Canopy, and the GoWest Foundation,” says Charlotte Nemec, president and CEO of Canopy.

Canopy is the only Spokane-based credit union participating in the program, she adds.

Canopy began distributing the loans to qualified small businesses in June, and since then has awarded 63 loans totaling just over $1 million.

Nemec says Canopy is on track to approve 80 loans totaling about $1.3 million through the program.

“We’ve had many small business owners that since this whole thing has started, have said, ‘Without this loan, we would have been forced to close our doors,’” Nemec says.

To qualify for a loan, businesses must have 20 or fewer full-time-equivalent employees and have been negatively affected by the COVID-19 pandemic, according to the GoWest Foundation website.

Businesses also are required to work with Small Business Relief Network partners to receive support and guidance as a condition of the program. The Spokane members of the Small Business Resiliency Network are AHANA, Latinos en Spokane, and the Carl Maxey Center.

“This loan is not just a typical loan, because it’s not just based on the financial record, it’s also based on the relationship that they have with partners like AHANA,” says Caldwell. “They have to have an ongoing relationship.”

In addition to providing guidance and support, the three nonprofits essentially act as references for the businesses and help determine if the businesses meet the program’s requirements, Caldwell explains.

So far, 36 of the Spokane small businesses AHANA has referred to the program have been approved and received loans.

One local business owner to benefit from the program is Isa Varela, who owns Las Delicias De Isa, a pop-up food booth and catering company that opened in 2022.

Varela heard about the program from a Canopy employee after she began banking with the Spokane institution. She then connected with Latinos en Spokane to pursue a loan through the program.

“It was a good opportunity to start building my credit,” she says.

Varela received a $25,000 Small Business Resiliency Loan from Canopy in August, which she used to purchase a truck and trailer for her business.

Varela is looking for commercial space, either to open a restaurant or expand the catering side of her business. Once the loan is repaid, she’ll use the grant funds to grow her business, she says.

“It’s a really good opportunity for a small business like mine,” Varela says.

The ways in which borrowers are using the loans vary, Nemec says.

“A lot of them are using them for purchasing new equipment, purchasing inventory, hiring someone to come on part time,” says Nemec. “It’s kind of been across the board.”

For some businesses, these loans create a trickle effect that allows them to grow exponentially, Nemec explains.

“These are not big loans,” says Nemec. “These very small businesses, sometimes that’s all it takes to help catapult them into the next phase. And then they get their credit built, and then can take out a little bit bigger loans so they can get catapulted maybe two phases forward.”

Applying for a Small Business Resiliency Loan is an easier process than applying for a more traditional Small Business Administration loan, for example, Nemec says.

“It creates an opportunity for them to not have to be so burdened with the amount of paperwork that you normally would have to do, say, for an SBA loan,” says Nemec.

If a borrower misses a payment through the pilot program, it doesn’t get reported, because the purpose of the program is to help people build credit, Nemec explains. The payment would come out of the savings account that holds the borrowers’ grant funds.

While the benefit to borrowers is clear, the program is also worthwhile to Canopy, Nemec says.

On top of aligning with the credit union’s goal to be inclusive, it also creates new business opportunities.

“Our hope is that we will build a long-lasting relationship with these small businesses, and they will come back to us time and again for their financial needs,” says Nemec. “We just feel like this is an opportunity to engage with that small business community where we haven’t really had that level of product and service that could meet their needs.”

Nemec and Caldwell both say the Credit Building Pilot Program is the only one of its kind in the area.

Caldwell says she hopes there are more opportunities like this in the future.

“Especially after COVID, a lot of businesses had to close down,” says Caldwell. “It always breaks our hearts that they had to, but had we had this program (earlier), they probably wouldn’t have to.”