Agency Created to Aid Northeast Valley Firms

A new agency to provide financial help for small businesses in the economically distressed northeast San Fernando Valley has been created under a bill signed by Gov. Gray Davis.

The bill provides about $5 million for business loan guarantees.

The legislation by Assemblyman Tony Cardenas (D-Sylmar) follows a study that identified the northeast Valley as one of five areas in the state in which small businesses have the most difficulty acquiring capital. The other areas are Thousand Oaks, Ontario, Santa Ana and San Jose.

“As someone who has owned a small business in the past, I understand how difficult it can be to get a loan,” Cardenas said. “This bill ensures that the state’s most underserved areas for business loans will have the ability to access capital.”

The Times described serious shortages of quality jobs, housing and health care in the northeast Valley in a recent series. The Los Angeles City Council earlier this month moved to heighten its own economic development efforts in the area.

At the same time, the financially troubled Community Development Bank, created as a key element of the city’s strategy to help pockets of impoverishment, recently closed its Pacoima office.

That move left business owners such as Michael Lavallee in dire need of funding to help finance expansion.

Lavallee’s Lido Bungee in Pacoima has been forced to turn down large orders because the Community Development Bank has failed to come through with sufficient funding to pay for expanding its manufacturing efforts to handle the orders, the business owner said.

“I had to say I’m not ready yet,” Lavallee said, adding the new state development corporation “would provide an alternative if the Community Development Bank doesn’t come through.”

Conventional private loans, Lavallee said, are hard to come by.

“There are no banks available to finance a company our size without a three-year track record,” Lavallee said.

Cardenas wrote a bill two years ago to study which areas of the state are underserved by the state’s existing eight financial development corporations.

The corporations, two of which are in south and west Los Angeles County, have used a pool of money to guarantee more than 2,000 private loans for small businesses, reducing the risk for banks to make the loans.

The study by UC Davis looked at those areas of the state that had the most rapid growth of small businesses from 1991 to 1996, had the greatest need for loan guarantees and the lowest ratio of state loan guarantees per 10,000 businesses.

The northeast San Fernando Valley, Thousand Oaks, San Jose and Santa Ana areas had the highest scores for need based on criteria used.

In recommending creation of an office in the northeast Valley to serve that area and Thousand Oaks, the study said, “The number of small businesses in the regions increased quickly from 1991 to 1996.”

The study found the number of small businesses in the northeast Valley increased 25% during that period and the number in Thousand Oaks increased 18%.

“Both regions already have businesses with a demonstrated need for bank guarantees,” the study concluded, adding the Small Business Administration has guaranteed 15,000 loans in each area.

Cardenas said he wants the new state office to open either in or near Pacoima, which is at the center of an area in need of economic development help.

Based on the study, the bill, which was signed by the governor Tuesday, also creates state development corporations in Santa Ana, San Jose and Ontario.

Each of the offices will receive about $5 million to use as a revolving fund for loans and guarantees, to be used to leverage more financing from private institutions, the assemblyman said.