From Predatory Loan to Affordable Financing: Opportunity Fund Helps a Community Leader Rebuild
Client: Cosmetica Latina
Client Location: Downey, CA
CDFI: Opportunity Fund
CDFI Service Area: National
A respected business leader in Downey’s Latino community, Maria Villarreal started Cosmetica Latina in 2002 to support Latino students throughout their studies with hands-on instruction, internships in the field, and real-world business skills. With 25 employees working as instructors and staff, Cosmetica Latina has graduated over 70 students with skills in barbering, cosmetology, and esthetics. Local non-profit community organization AMPAC Tri-State CDC helped Maria get started with a 504 Small Business Association loan to buy the building she was renting for her school.
Later, when she needed another small business loan to help expand her school through advertising, the only option she could find was a high-cost merchant cash advance loan. Soon she found her cash flow drained under the weight of high monthly payments. “When I signed up for that loan, I thought I was getting low interest financing,” Maria said. “I wanted to build my credit with that loan, but they didn’t report on my credit.” Through Opportunity Fund’s Community Partners Program, AMPAC Tri-State CDC connected Maria with Opportunity Fund when it became clear she needed help refinancing her predatory MCA loan. Community development officer Robert Zapata helped Maria get the $50,000 loan she needed to pay it off.
Opportunity Fund’s commitment to providing easy-to-get, fast, and affordable loans included a fight with Maria’s MCA lender. “They offered a lower interest rate to keep me,” Maria said. “They wouldn’t release the payoff letter to Opportunity Fund either.” By refinancing Maria’s high interest MCA loan, Opportunity Fund was able to reduce her monthly payment from $6,000 to $1,600. The extra cash flow allows her to reinvest in marketing. Maria is thankful to work with Opportunity Fund as she rebuilds her business lending profile. “Opportunity Fund was completely transparent,” she said. “They helped me understand the loan process and showed me I wasn’t the only one who gets stuck with these very high interest loans.”
Maria is taking her negative lending experiences and turning them into positive actions within the community. She shares her story among her network of small business owners so they don’t fall into the traps that target entrepreneurs. “I want to make the community aware of financing options and help them make good lending decisions,” she said.