Are Microloans Good or Bad for Small Businesses?

Entrepreneurs start nearly half a million new businesses each year in the United States. It is not an easy process and comes with a whole set of challenges. A third of new businesses do not make it into their third year, and half are gone before their fifth year. But the potential rewards are worth the risks for many people, and are available for those who look ahead, plan wisely, and utilize the right resources.

For most owners of new businesses, the stakes are high—they put everything they can into their business with the hopes of big returns. In light of this, it makes sense to seek out as much assistance that is available. TMC Financing’s sister organization, Working Solutions, has much to offer new business owners and emerging businesses, including microloans that can help propel small businesses into successful growth.

Overcoming Financial & Managerial Obstacles Using Working Solutions’ Microloans

Broadly speaking, there are two main obstacles to new business success: financial and managerial. Financing is not always easy to find for new businesses, and new entrepreneurs can benefit from the guidance of more experienced voices.

The support business owners receive from organizations like Working Solutions can be crucial to their success. By supplementing the knowledge and financing they receive with their own expertise and hard work, they can create thriving businesses. Often times, a microloan is just the first stepping stone for a small business owner. Many borrowers “graduate” from a microloan and move on to a bigger cash injection to expand their business or to stabilize their occupancy costs by purchasing a building to operate out of.

Ryan Farr’s 4505 Meats is a great example of this. Farr’s business had a fantastic following with very loyal customers. Business was increasing rapidly and Ryan had a true potential to significantly grow his business. However, he had not reached the “bankable” stage of his career and therefore was unable to receive financing from a conventional bank. To keep his business on track and gain some business insight, he worked with Working Solutions financial mentor, Sean Hutchinson. Ryan and Sean worked together to address some of the growing pains the business was facing and figured out how to better streamline the business. Ryan was encouraged to focus on certain aspects of his business instead of trying to do it all on his own. He also received a microloan from Working Solutions that set him on course to establish a line of packaged chicharrones and two barbeque restaurants.

After Farr had established 4505 Chicharrones and the 4505 Meats restaurant in San Francisco, he was ready to repeat his success in Oakland. Through TMC Financing, he received a larger 504 loan to purchase a building and open a second location in Oakland’s Laurel District. Farr’s 4505 restaurant in San Francisco has been praised for serving one of the 25 best burgers in the Bay Area and he has high hopes for his new 4505 Oakland location as well!

Working Solutions Graduates Are Succeeding Across the Bay Area, Thanks to 504 Loans

Other Working Solutions graduates have taken similar paths. David Muller and Lana Porcello love food and their beachside San Francisco neighborhood in the Outer Sunset. Armed with that passion, they came to Working Solutions. Thanks to individualized training and a microloan, they created Outerlands, a sustainability-oriented restaurant and neighborhood institution. They enjoyed so much success, they are expanding into the premises a few doors down. They are in the process of buying the building to house a second restaurant and new bakery using a 504 loan from TMC.

Interior of the Outerlands restaurant in San Francisco

Meanwhile, Jeremy Tooker was a cofounder of the successful Ritual Coffee roaster and cafes. He left Ritual Coffee to set up a Four Barrel Coffee from scratch, along with Jodi Green and Tal Mor. After receiving a Working Solutions microloan, Jeremy and his partners were able to expand their offerings and further their growth by acquiring a well known SOMA-based coffee roaster, De La Paz.

After success necessitated they buy a facility to house their new Oakland Roastery, Four Barrel received a 504 loan from TMC Financing. Following years of continued success, Four Barrel was thriving and ready to take out another 504 loan to purchase a new cafe. Now, along with their Oakland Roastery, Four Barrel will own the Inner Sunset building in which their fourth cafe will be located. Both loans provided over $2 million toward project financing. That money went towards the purchase of two buildings and renovations necessary to tailor to their needs.

In the difficult process of establishing a successful business, financial and educational support can be crucial. These three business owners turned their knowledge and experience into thriving businesses by working with Working Solutions and later, TMC Financing. Their success illustrates the important role microloans can play for small businesses, as well as the benefits of “graduating” to a 504 loan from a Certified Development Company (CDC) like TMC Financing.

TMC Financing is one of the nation’s top-ranking CDCs. It helps hundreds of businesses in California and Nevada every year. Contact a 504 expert at TMC today to find out how your business can benefit from a 504 loan or the services of Working Solutions.

Barbara Morrison, a local small business advocate and civic leader, founded her first company TMC Financing in 1981. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs. TMC is also the No.1 SBA 504 hotel lender in the United States. Barbara is also the founder of Working Solutions, a Bay Area microlender whose mission is to provide micro entrepreneurs, particularly low-income individuals, women and minorities, with the access to capital and resources they need to start a successful business.
Barbara Morrison