“We have an operational plan that has helped us gain efficiency,” says Brandon Napoli, Valley Economic Development Corporation’s Director of Microlending. “We have agreements on who does what and how long each step should take. We can monitor when things get off track.”
With this operational plan in place, VEDC’s micro loan program has surpassed all its California CDFI peers in staff efficiency. They averaged 35.5 loans closed per full-time equivalent (FTE) staff person last year – with little automation. “We’ve had a pretty manual process up to this point,” says Brandon.
VEDC has become the largest non-profit business development corporation in the metropolitan Los Angeles area. Their programs include:
- SBA Women’s Business Center
- San Fernando Valley Financial Development Corporation
- Pacoima Development Federal Credit Union
- Los Angeles Business Source Center
With a staff of 8.5 FTE in the microloan department (including 3 underwriters and shared support staff), Brandon’s team closed 302 deals last year for a total of $2.3 million and will close about 270 this year. Their total portfolio is $4.6 million. They have one product: a microloan from $1,000 – $50,000, with a term of 3-5 years and a rate of 7.75 to 9.75%.
Each staff person defines weekly goals and the department defined a process that guides how often, how quickly and on what basis to talk with an applicant:
- a quick assessment of an application,
- a call to the borrower the next day to request documents,
- two days to underwrite once documents are received, and
- then approvals the same week.
“We try to only contact each borrower twice,” says Brandon. Their approval process operates like clockwork every week. Brandon can approve deals up to $10,000. He has Tuesday and Thursday meetings with his supervisor to approve deals between $10,000 – $25,000. For deals greater than that, there is a two-day approval turnaround from VEDC’s CEO Roberto Barragan.
Brandon’s lending staff has the benefit of an in-house business training program run by VEDC. His team trains the business technical assistance staff, who help with applications by gathering documents and working on other business development needs of borrowers. Brandon estimates that half of their deals come through or are assisted by the training program.
Brandon feels that their success is due in part to good messaging and communication to prospective borrowers, so clients know what is expected. The application, which comes with a welcome letter and examples of success stories, is two pages. The application, a credit report and a couple months bank statements is all the VEDC underwriters need to quickly assess the loan on the client’s ability and willingness to pay it back.
VEDC isn’t resting on their impressive efficiency. This year they plan to further automate their system by creating a customized CRM system to track each applicant, import bank statements and generate documents automatically. In addition, VEDC is talking with FundWell, an online marketplace that pre-qualifies applications and matches them with lenders. FundWell presented at CAMEO’s January 2015 Microlending Forum.
With the additions of a fully integrated CRM system and FundWell feeding the pipeline with pre-qualified deals, we are looking forward to learn what VEDC’s microloans per staff will look like in 2016.
Brandon Napoli is the Director of Microlending for VEDC. VEDC’s mission is “to create and sustain jobs and businesses in our communities by providing high quality small business services…to enrich communities by making small business dreams a reality.”