Serving up no-interest loans
Jessica Mortarotti dishes out samples of her ice cream and sorbet infused with fresh-cut chocolate mint, rose petals or lemon and basil at local farmers markets, building her Carmela Ice Cream Co. one spoonful at a time.
The 30-year-old co-owner, who launched the part-time Los Angeles business last summer with $10,000 from the Jewish Free Loan Assn., invested $15,000 of her own money last week to buy the bigger equipment she needs to meet surprisingly hot demand.
“We didn’t expect to need new equipment so fast,” Mortarotti said.
Every 10 minutes, her new gear can churn and freeze 25 pints of ice cream or sorbet packed with herbs, spices, flowers, nuts and fruits. That’s five times the capacity of her original equipment, which she bought with the proceeds of her interest-free loan.
The loan was made from one of five little-known micro-enterprise funds managed by the Los Angeles nonprofit Jewish association. The group, part of an international network of interest-free loan agencies, got its start in 1904 when several Jewish businessmen pooled their money to help new emigres. The association now makes loans of as much as $15,000 for start-ups or existing small businesses.
The group of funds, which are created from private donations, total about $1.75 million.
A relatively new, nonsectarian fund for female entrepreneurs made 13 loans in the first six months of the year, compared with four in the same period last year, according to the association.
“Our micro-enterprise loans are made to people who are really not able to get money from any other sources,” said Mark M. Meltzer, chief executive of the organization, which boasts a repayment rate of 99.5%.
His agency manages about two dozen other funds for emergencies and student loans, among other needs. It targets the Jewish community but has at least a dozen funds open to non-Jewish applicants.
The group gets 12 to 30 requests a month for its business loans, with many applicants referred by a small-business development organization such as SCORE, the former Service Corps of Retired Executives, or Los Angeles-based PACE, the Pacific Asian Consortium in Employment.
“It’s a really nice opportunity” for qualified clients, said Jackie Jones, director of the Women’s Business Center at PACE in downtown Los Angeles. She referred Mortarotti to the Jewish association’s program.
The no-interest provision could save a client $1,350 on a $15,000 loan compared with a government-backed loan, which typically adds 4 to 5 percentage points to the prime rate. The rate is now 5%, down from 8.25% a year ago.
The program doesn’t work for every start-up or existing small business because it requires two credit-worthy co-signers, Jones said. Usually, both must be California residents.
That requirement has been a headache for Erika Ewers, 31, who is applying for a $15,000 loan from the group to start Willow, a studio and online store that will sell clothes she is developing for tall women.
The 6-foot-tall Culver City resident and former wardrobe and prop stylist had struggled to find qualified co-signers.
“I was pretty shameless with all the people I asked,” said Ewers, who supports herself by bartending while she tries to get her business off the ground. “They all very nicely said, ‘No way.’ ”
Her brother in San Francisco finally agreed to co-sign. To speed up the process, Ewers drove to his house to pick up the paperwork. Her parents also agreed, but Ewers had to request a waiver from the association because they live out of state.
The group said about 75% of its business-loan applicants make it past the initial stage and are invited in for an interview. If they pass that stage, the application goes to the loan committee. Most decisions are made within a few weeks, said Elana Vorspan, program and marketing director.
The group’s interest-free premise is based on a Bible passage that forbids charging interest for “any of my people among you who is needy.”
The goal of the association -- and the International Assn. of Hebrew Free Loans, which shares its offices with the group -- is to spread the Jewish tradition of gemilut hesed, which the group translates as “acts of kindness.”
That kindness has helped businesswoman Mehrdokht “Dokhi” Mirmirani Chambers expand her floral business since she first opened its doors in 1987. She got her initial interest-free loan two years later, for $3,000.
Now on her fifth loan, Chambers applied for the $15,000 maximum a year ago to help move her Jasmine Blue Flowers to its new, larger location in Sherman Oaks and to redesign her website.
“They welcomed me without question [about] from what country I am coming, what religion. They just listened to me,” said Chambers, 56, who supplies organic and locally grown flowers to the entertainment industry.
Her four-person shop averages about $1 million in annual sales, said Chambers, who has never had a traditional, commercial business loan.
Ice-cream maker Mortarotti appreciates her interest-free loan, which she is repaying at the rate of $250 a month. But she expects to need more money than the nonprofit lender can supply for her next step.
In 18 to 24 months, she and her co-owner and boyfriend, Zachary Cox, hope to open a retail shop, possibly in Culver City’s proposed Westside Market Hall, which would house food artisans, restaurants and farmers’ stalls.
“We’re going to need more substantial loans or investors when we expand to a storefront,” said Mortarotti, who sells her ice cream at three farmers markets for $9 a pint or $3 half a cup. Her most popular flavors include brown sugar-vanilla bean, Aztec chocolate with chilies and strawberry-balsamic vinegar sorbet.
She also supplies special events and delivers her products to a handful of wholesale customers, including Bar on 4 at Neiman Marcus in Beverly Hills.
Soon, Auntie Em’s Kitchen in Eagle Rock will serve her ice cream flavors and carry them in the business’ retail section.
This week Mortarotti will unveil a revamped website that will enable customers nationwide to order a six-pint package of her seasonal flavors shipped on dry ice for $110, including shipping.
“Things,” Mortarotti said, “are heating up.”
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Interest-free loans
The nonprofit Jewish Free Loan Assn. offers no-interest loans of as much as $15,000 for start-ups and existing small businesses. Here are some details of the program:
Loan funds: Five micro-enterprise loan funds, two of which are nonsectarian.
Number of loans: 20 micro-enterprise loans (Jan.-June 2008)
Amount lent: $4.5 million in micro-enterprise loans over the last 12 years
Number of applicants: Three to seven loan application packets are received each week.
Acceptance rate: 75% make it to phase two, the interview.
Requirements: They include permanent residency in Los Angeles County, two creditworthy California residents as co-signers, a viable business plan and cash flow projections, a demonstrated need for the loan and the ability to pay it back.
Contact: For more information, contact the association at (323) 761-8830, or go to www.jfla.org.
Source: Jewish Free Loan Assn.
