Luz Urrutia is the CEO of Opportunity Fund.


MarketWatch photo illustration/Opportunity Fund| iStockphoto

The owner of World Empanadas, who started the Burbank, Calif.-based business in her mid-50s after being laid off from the financial-services industry. The Black entrepreneur who started Mosaic Global Transportation, a shuttle business in Silicon Valley. A Mexican immigrant who went from selling tamales door-to-door to selling them at the Golden State Warriors’ new high-tech arena.

Those are some of the people whose stories stick with Luz Urrutia, the CEO of Opportunity Fund, which helped those businesses grow. Opportunity Fund, a San Jose, Calif.-based community development financial institution (CDFI) whose mission is to lend to small businesses in 44 states across the country, claims to be the nation’s largest microfinance organization.

For 25 years, the nonprofit has been lending money to mostly women, immigrants and minorities who may have not qualified for or been rejected for loans by other financial institutions for various reasons, including an insufficient credit history because they are new to this country or a lack of assets to put up as collateral. But Opportunity Fund takes their drive and trustworthiness — what Urrutia calls “moral collateral” — into account.

While the organization’s interest rates are usually a little higher than those of traditional banks but lower than credit-card and other alternative loan rates, the microlender says its rates are equal to or better than those banks’ because of special philanthropy programs.

The organization’s work is vital because “small businesses are second only to homeownership as the source for building wealth in this country,” Urrutia said in an interview with MarketWatch, during which she also discussed how small businesses are being affected by the COVID-19 pandemic and the economic crisis it has sparked.

This interview, the latest installment of The Value Gap, has been edited for length and clarity.

MarketWatch: How does Opportunity Fund help small-business owners? How does that translate into helping to try to close racial wealth gap?

Urrutia: Just $1 out of every $23 in conventional small-business loans goes to women entrepreneurs — that’s 4%. At Opportunity Fund, 34% of our borrower base is women, which is [eight] times more than that. Half of our borrowers are immigrants.


‘A lot of lenders will not lend if the borrower doesn’t have collateral like a car or a house. We believe moral collateral is more important than fixed-asset collateral.’

People of color are denied credit more often and are charged higher rates. We’ve seen thousands of our borrowers go from credit-invisible to having an average credit score of 630.

We also take into account the owner’s moral collateral. A lot of lenders will not lend if the borrower doesn’t have collateral like a car or a house. We believe moral collateral is more important than fixed-asset collateral. Prior to COVID, we had 93% historical repayment rates, which is extraordinary. We had a 94% business-survival rate, almost twice that of the national average.

Large banks need to increase their investments in these groups. They have capital, the scale, and it would be perfect if they would join and help serve these underserved communities to help close the gap. What they do is they provide loans to organizations like us under the Community Reinvestment Act so we can lend directly to those communities.

A lot of corporations have announced initiatives to help Black-owned businesses. There’s been a reckoning. We have the pandemic that threw us into a crisis. Then the racial reckoning in a pandemic, and starting to think more purposefully about how to help rebuild the businesses that keep the country going.

MarketWatch: How important is your work at this point in time, especially considering the precarious state of small businesses as uncertainty continues because of the pandemic? One out of every 100 businesses in the San Francisco metro area has permanently closed, according to new data from Yelp.

Urrutia: It doesn’t matter what study you look at — businesses owned by women, people of color and immigrants have been most impacted at this time. Thousands of businesses in the Bay Area are gone. Color of Change and UnidosUS found that only 12% of Black and Latinx small-business owners got [the Paycheck Protection Program loans] they asked for.

One of our concerns is this is a prime market for predators and bad actors to get in as businesses are desperate and need cash. It’s important that they recognize quickly that they have options.

We saw this during the Great Recession. Many small-business owners resorted to financing that did more harm than good. Then when the new lender needed to collect, they got caught in a spiral of debt. They need to evaluate their options very carefully and read the fine print.

The amount of distress in communities right now is great. The smallest businesses are always operating with minimum cash reserves. They generally know how to be very resourceful, have perseverance and are careful about how they manage their finances. Some of them have been able to pivot successfully to keep revenue coming in.

But if something were to happen again in September or October, it would be totally devastating. They have depleted and gone through savings, family resources, everything they had.


‘Small businesses employ half of the workforce and create 64% of new jobs. It’s second only to homeownership as a source of building wealth in this country. It’s critical because of wealth inequality.’

MarketWatch: How is the pandemic affecting your approach to lending?

Urrutia: We’re taking a little more conservative approach. All businesses are not created equal. We’ve had to look at it one by one, which businesses have the chance to survive with our help.

Because Congress is not doing their job, funding is not coming out to help small businesses. That’s why we urge small businesses to work with CDFIs, where they will be treated responsibly.

And right now there’s an opportunity for businesses that need grants — they don’t need loans; they need grants. They need to make extreme changes to survive.

Small business is key to reviving the U.S. economy.

MarketWatch: How do small businesses affect wealth and the economy? How do minority small-business owners fare?

Urrutia: Small businesses employ half of the workforce and create 64% of new jobs. It’s second only to homeownership as a source of building wealth in this country. It’s critical because of wealth inequality.

Black families who own businesses hold 12 times the wealth of families that do not.

The Harvard Business Review said immigrants are twice as likely to start businesses as U.S.-born residents. Yet often these days immigrants are vilified.

Between 2007 and 2017, minority-owned businesses grew by 79%. Latina-owned businesses grew by 172%.

The pay gaps in gender and race persist. It will take over 200 years to close the gender gap. We don’t have that much time.

People are turning to self-employment out of passion and drive but also out of necessity. We need to pay attention to these businesses. This is about a hand up, not a handout, and that needs to be made very clear.

MarketWatch: Can you talk a bit more about some of the greatest challenges and obstacles for small-business owners?

Urrutia: Business owners need networking — this part can be fixed. Many immigrants gather at ethnic churches and communities. They have to build their networks because they start off without support.

It’s critical that they surround themselves with people who have been there and done that. It’s important that they’re hiring the right people who are qualified to do what they do. Business owners generally understand their trade. But they need other resources for their businesses to flourish, like bookkeeping, accounting and managing their cash flow.

But one of the top challenges small-business owners have is accessing capital. Banks and many other lenders generally do not lend to businesses that have been operating for under three years. Many immigrants come to America with no credit score. Women tend to have thinner credit files and lower credit scores.

We need to develop an inclusive system that helps these vulnerable people. The credit score is a passport into the American financial system. It’s a pathway to financial stability, local investment, increased wages and increased spending.

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