Rudy Espinoza, President & CEO of Inclusive Action for the City, on LA’s Street Vendors, Micro-Loans, and More
The Entrepreneurs of Color Fund (EOCF) is designed to get much-needed capital directly into the hands of small business owners serving communities of color, and has over twenty CDFI partners in local markets across the country, with LISC as national manager. Inclusive Action for the City (IAC) is a community development financial institution and an EOCF partner in Los Angeles providing micro-loans to businesses, with a focus on food vendors. IAC’s Rudy Espinoza explains why protecting street vendors must not be a passing trend but a sustained cultural shift that creates a more inclusive economy.
(Image above is courtesy of Inclusive Action for the City)
Inclusive Action for the City (IAC) is a community development financial institution (CDFI) and an EOCF partner in Los Angeles providing micro-loans to businesses, with a focus on food vendors. The CDFI has been lending to small businesses for 10 years and has deployed over 150 microloans through the EOCF program. Sustained organizing throughout the city has already resulted in positive changes for vendors and their customers: there is now a permit system for street vendors across Los Angeles County and ‘no vending zones’ have been removed in popular tourist areas, which has decriminalized food vending and made it a safer, more accessible profession. Yet vendors still face serious challenges. For example, IAC has seen an increasing number of borrowers with predatory debt due to lack of access to capital, sometimes with 100% interest rates on loans to meet basic business needs.
IAC’s work is to ensure progress isn’t just a passing trend but a sustained cultural shift that creates a more inclusive economy. CDFIs like Inclusive Action are centering this commitment through close relationships with business owners involved in the lending process and by providing larger investments that can go further in changing the landscape for small business owners.
Read on for LISC’s Q&A with Rudy Espinoza, president and CEO of Inclusive Action for the City
LISC: What trends are you seeing in the Los Angeles small business ecosystem?
Rudy Espinoza: In Los Angeles, we are seeing an exciting trend focused on supporting micro-entrepreneurs, mobile vendors, and street vendors. In recent weeks, the County of Los Angeles adopted a long-awaited permit system for street vendors in unincorporated parts of the County, and in the City of Los Angeles, the City Council voted to eliminate controversial “no vending zones” that prohibited vending in popular tourist locations. At this latest hearing, the Council president described how important street vendors were for our economy, and how many relied on street vending as their last option to care for their family.
For many Angelenos, the overtures are common sense expressions of what we know and love about our city. But our team knows that these attitudes from elected officials have resulted from years of direct advocacy and persistent challenging. Many people have fought hard for street vendors to be a “trend.”
Our challenge as a region will be how to transform our love for street vendors from a trend to a norm. Trends are fleeting. Norms are ingrained into culture and sometimes, in policy. An inclusive economy - one that includes businesses of all types - should be a standard in any major city in America.
The small business ecosystem is responding to the increased interest in street vendors. Organizations are emerging to offer workshops to street vendors seeking permits, and others are applying for grants to develop commissaries and commercial kitchens.
Policy makers should be reminded: if we create inclusive economies, whole ecosystems will grow to support.
What trends are you seeing among small businesses coming to IAC?
Despite the headlines that assure the American public that the country is creating jobs and our GDP is growing, many small businesses would tell you otherwise. Indeed, many never made it out of the pandemic. Those that have survived are doing what they can to find stability for their businesses and their families.
We are meeting many entrepreneurs in search of grants, or worse, loans to help them pay for basic needs. Others are coming in saddled with predatory loans they used to make payroll or keep their landlord at bay. Often, these predatory loans are charging upwards of 100% interest but are the only capital resource available to them in their community.
I’m growing worried about the advances in “fintech” to meet the capital needs of small businesses (and consumers) in our neighborhoods. More and more, we’re seeing high-interest loans become available to help people purchase products and services using a “buy now, pay later” model that is convenient, but can really harm people who are desperate to survive another week.
We’ve learned that the small businesses in our communities are not just entrepreneurs; they hold multiple identities. Small business owners may also be parents, caregivers, tenants, patients, and even workers themselves. These multiple identities are surfacing now more than ever as inflation and a turbulent economy are pressuring many segments of our economy.
How is Inclusive Action working to meet the trends and needs you’ve identified in your communities?
We’re meeting the needs of small businesses by staying in proximity to them, engaging them directly to learn about what they’re experiencing and adapting our products and services.
For those burdened with predatory debt, our team has been proactively looking to refinance bad loans to help people get on a pathway towards economic freedom. Often, a simple refinance of some bad debt can expand the possibilities for an entrepreneur who needs a bit more cash flow in their business or personal expenses.
This year, we aim to deploy more micro-loans than ever before. To do this, we are looking deeply at our underwriting processes, and examining how we can move quicker to review loan applications and make a funding decision. This can be difficult working with a population that needs a lot of support to apply for a loan. Historically, we spend an average of 10 hours with each business owner before a loan is funded. This “pre-loan” technical assistance is important, but we are looking at how we can make this process easier through modest reforms to our processes and incorporating technology in a way that keeps our program human-centered.
Lastly, seeing and honoring our borrowers’ multiple “identities” and the needs that come with each means that we have found ourselves working urgently to not only lend to them, but help them access grants. We’ve served successfully as a grant intermediary with LISC and major banks like Wells Fargo as well as established new partnerships with government agencies like the County of Los Angeles’ Department of Economic Opportunity. During tax season, we host a VITA site for our borrowers and other community members, and our lending team has even propped up a rental assistance program with support from the United Way of Greater Los Angeles. These partnerships help us tap outside capital and funnel it to our community members.
What is still needed to better support diverse small businesses and underserved entrepreneurs?
Small businesses need to be funded. It’s really that simple. Despite the historic investments in small businesses during the pandemic (ex: PPP), many still closed their doors and others are holding on to a thread.
We shouldn’t wait for the next crisis to mobilize capital to support small businesses, we should do it now, and we should do it in a big way. The CDFI industry and advocates need to organize and make a strong case for serious investment into small businesses; not just from philanthropy but from our government. Our government has the power to scale our pilot projects, and it has the resources to make meaningful changes in the lives of low-income workers and struggling entrepreneurs. We need grand investments to capitalize low-interest loan funds, establish monumental guarantee programs, and for our most vulnerable entrepreneurs, we need to establish historic grant pools that can give Black and brown entrepreneurs the jump-start they need to get unstuck from the widening racial wealth gap that hinders their ability. We don’t need millions, we need billions.
In a turbulent economic climate, moving policymakers to invest more in small businesses might seem like a proposal that is dead on arrival. But, I believe the voices of the entrepreneurs in our communities carry such powerful stories that if we harness them, they can move hearts and minds. The borrowers we work with at Inclusive Action have grand visions for their businesses and their families. We must match their visions with our own dreams of what is possible and fight until they become a reality.