Flan Man Typifies Loan Program’s Triumphs
Horacio Pena was probably never going to find a bank willing to lend him $10,000 to start a business, no matter how hard he tried.
Pena, an immigrant from Mexico, had been in Salt Lake only a few years, working as a server in a downtown restaurant. He wasn’t a U.S. citizen. His English wasn’t perfect and his credit record was thin. The chances that a fledgling business making flan desserts could survive were almost nil.
Yet today Pena is in business. His company, Sophi-Flan, has 90 customers around the the Salt Lake Valley. Pena employs two full-time workers. Together they make 350 flans a week in a variety of flavors at an industrial kitchen owned by Jorge Fierro, another businessman-expatriate from Mexico.
“I tried to go to a few banks. They don’t accept me. I didn’t have too much credit,” said Pena, who found the fruitless loan search upsetting. “I don’t find any money until I find Utah Microenterprise.”
Now in its 13th year, The Utah Microenterprise Loan Fund is a nonprofit lender providing money to launch or expand small businesses. It lends small sums to people who want to start or expand a small business, gambling on individuals who may have first-class ideas but don’t have resources of their own and fall outside the risk profiles conventional lenders use to screen applicants.
The fund’s loans come at a steep price – prime (the interest rate banks charge their best customers), plus 5 percent. Right now, that comes to 13.25 percent, an interest rate that reflects the risk connected with lending to unproven borrowers. One in 10 loans goes bad. By contrast, banks typically charge off about 1 percent of their loans, Ricci said.
Most borrowers, however, build prosperous businesses. A joint study by the fund and the Aspen Institute last year discovered that the businesses of 72 borrowers had combined sales of $7 million and had created 316 jobs.
Photo by Steve Griffin/The Salt Lake Tribune.
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