Three Firms Get Initial RLA Loans to Expand : Rebuilding: Funds totaling $530,000 will go to waste disposal, sewing and auto transmission businesses. Deals come after long delays.
An hour after the final verdict was read in the Reginald O. Denny beating trial Wednesday, RLA, the private agency created as the city’s primary response to the 1992 riots, announced the recipients of its first three business loans designed to assist in the economic recovery of inner-city neighborhoods.
Loan papers committing $530,000 were signed with ethnic minority owners of waste disposal, small-contract sewing and auto transmission remanufacturing businesses. By coincidence, the action came at a news conference held just after the conclusion of the case that supplied the most vivid images of the rioting that spawned RLA.
“The end of the Denny trial puts a closure, a punctuation mark, to what I would call the era of the riots,” said Barry Sanders, co-chairman of RLA, which was formerly known as Rebuild L.A. “Now we will stop seeing televised replays of Florence and Normandie every day.
“We’re in a new era, and it’s an era where we’ll do things about the things that got us into the old era. So it is an auspicious day.”
In all, about 34 jobs are expected to be created by the expansion of the three businesses, which probably would not qualify for expansion loans from traditional banking sources because of their small sizes and limited collateral resources.
The RLA Community Lending Corp. plans to make few, if any, loans to newly created businesses and is still awaiting enough backing from banks in the Los Angeles area to stretch its capital by targeting it for loan guarantees as well as direct loans.
“This is a very exciting day, and that’s an understatement,” said Clotee McAfee, who runs the Deljah Simone Inc. sewing company in South-Central Los Angeles. “This will allow us to expand into an area we would have never been allowed to get into.”
McAfee plans to repay her $230,000 loan, which she will invest in a shirt pocket setter and other high-quality equipment for manufacturing clothes, with the proceeds of a contract to supply 14,000 uniforms to employees of the Southern California Gas Co.
Samuel Perdomo, who operates the 45-year-old Perdomo and Sons waste hauling business in East Los Angeles, will use his $150,000 loan to hire 10 new employees for minority subcontracts he holds with larger contractors to haul compost and sewer debris collected in Los Angeles.
A $150,000 loan to Superior Powertrain Transmission Exchange in Huntington Park will go toward the purchase of a new van and the hiring of four new workers to better compete for lucrative fleet maintenance contracts, said co-owner M. Terie Salinas.
With corporate downsizing and limited government assistance to revitalize riot-torn neighborhoods, community leaders are looking increasingly toward small businesses to assist inner-city areas. But funds to open new businesses or expand the 55,000 now in operation in low-income areas are difficult to come by from traditional lenders.
The RLA fund, formed with $5.75 million in contributions from corporations and the federal government, is one of several alternative loan funds getting off the ground.
Since July, at least four news conferences to announce the first commitment of RLA loans have been postponed.
“It takes more time than you know about when you’re first learning the business of being a lender,” Sanders said Wednesday. “It’s a complicated business.”
RLA officials say the fund, designed to make loans ranging from $25,000 to $250,000 to existing small businesses, will continue to do direct lending but hopes to make more efficient use of its capital by targeting much of it to guarantee loans made by a pool of commercial banks.
As yet, however, only six banks have agreed to be in the pool and no bank has yet stepped forward to become the lead institution for handling the loans.
RLA, which received $2-million grants from Southern California Edison and the federal Department of Housing and Urban Development as seed money for its lending fund, is hoping to raise an additional $14.5 million in capital from corporations and foundations.
The private agency has made less headway in its plans to develop an equity fund to provide from $250,000 to $1 million in capital for small business expansion.
In the six months since RLA officials announced plans for the loan fund, they have received 1,500 inquiries and mailed out 800 applications, of which 45 were completed. Eight of the applications are being given serious consideration for funding.
Although a majority of the applications have come from inner-city residents seeking to start new businesses, RLA plans to shy away from funding business start-ups.
“The history everywhere is that start-up businesses have a poor prognosis for survival for more than two or three years,” Sanders said.
