The Ottawa Community Loan Fund
By George Brown, Managing Director, Ottawa Community Loan Fund

The Ottawa Community Loan Fund (OCLF) provides loans of $1000 to $15000 to promising entrepreneurs in Ottawa, to start or expand their small business venture. While traditional financial institutions acknowledge the importance of small business and its impact on the economy, they are hesitant to play an active role in micro lending because of the higher risk and increased administration time. As a result, dedicated entrepreneurs with viable business concepts encounter significant challenges in accessing business financing without strong collateral backing and a proven track record.

In July 2000, after several community-wide consultations, the OCLF was formed as a non-profit lending institution to provide an alternative source of financing for Ottawa entrepreneurs, co-operatives, and social enterprises. The benefits of a community loan fund in Ottawa have been widely recognized and, to date, in excess of $450,000 has been received or committed to the OCLF. This support has taken a number of forms including corporate sponsorships, in-kind and cash donations, municipal government grants, and grants from foundations.

The management and stewardship of the fund is facilitated by a dedicated board of directors that oversees the successful operation and evolution of the OCLF. Experienced staff, with over 40 years of combined banking and small business development expertise, manage the day-to-day operations of the fund, ensuring that lending criteria are observed and that a healthy loan portfolio continues to build. As of February 15, 2005 the OCLF has been responsible for the disbursement of approximately $413,839 in small business/self reliance loans to 40 Ottawa area businesses and 29 Foreign-Trained Professionals, such as nurses and teachers seeking accreditation in Ontario. Only 2 loans out of these 69 have had to be written off.

The Benefits:
The benefits to the entrepreneurs and the community are as numerous and diverse as the borrowers themselves.

Development or re-establishment of a positive credit history:
“I had direct business experience and a solid business plan, but what I didn’t have was a credit history or collateral to prove that I was a good risk,” says one OCLF borrower. “Acquiring financing through the Ottawa Community Loan Fund was my last hope. I used a portion of my OCLF financing to secure a line of credit at a chartered bank. Now I have flexibility when purchase supplies and rent equipment, and I have been able to expand my marketing tools and increase sales. This financing has given me the solid foundation that I needed to start and grow my business.”

Newcomer settlement:
An immigrant from Africa, this OCLF borrower had taken a number of business-related courses to improve her skills since coming to Canada. Now a Canadian citizen, she was taking steps to start a small business importing clothing and jewellery from the Middle East and selling it to her ethnic community in Ottawa. Lacking a credit history and sufficient financial collateral for bank financing, she obtained start-up financing from a private company at an effective interest rate of 200%. Referred to the OCLF by Royal Bank, she was successful in obtaining a loan that allowed her to repay her debt, purchase inventory, and make monthly repayments that were significantly less than her monthly payment to the private finance company.

Youth support:
“Young people with great business ideas are often intimidated and discouraged by the difficulties they encounter in obtaining financing,” says Anne Jamieson, Vice President, Ontario and Quebec, Canadian Youth Business Foundation. “With the help of our community partners (such as the OCLF) and our volunteers, the Canadian Youth Business Foundation provides a friendly, youth-oriented approach that encourages and supports young entrepreneurs in realizing their dreams.” The OCLF approved its first CYBF loan applicant in February 2001. In addition to financing that is specifically designed to meet the needs of young entrepreneurs, each CYBF borrower is matched with a mentor from the Canadian Executive Services Organization (CESO) to provide on-going coaching and guidance over the term of their loan.

Results:
The OCLF plays an important role in supporting small business owners to develop personal assets and a positive credit history. By providing access to capital, the OCLF is also ensuring that its borrowers can become active participants in the traditional banking system. Contrary to traditional lenders, the OCLF measures part of its success by the number of borrowers who repay their loans in a timely fashion and then become eligible for the full array of business and personal banking services offered by the chartered banks and credit unions.

“Tim Bellamy is looking forward to getting a second truck for his growing lawn care and snow removal business, using his improved credit profile to get conventional financing. That’s a big change from just a year ago, when Mr. Bellamy couldn’t get his own bank to even discuss a $7,000 loan so be could buy his first truck to get the business up and running. He ended up paying nearly 32 per cent – higher by far than most credit card rates – to a finance company and putting his used truck up as collateral. … But things have improved greatly, and he credits the Ottawa Community Loan Fund for the leg up that has helped make the difference.” - Excerpt from Ottawa Citizen, September 29, 2001.

2005 Goals:
The Ottawa Community Loan Fund has demonstrated a proven process that is filling the financing gap for Ottawa entrepreneurs. With demand building and loan repayments at a default rate of 7%, the OCLF must advance and accelerate its services to continue to meet the needs of small business owners. To this end the Board of the OCLF has identified these strategic goals:

· to maximize the number of self-employment loans;
· to respond to demand in the community for new self-reliance financial products;
· to secure an increase in loan capital to support all lending activity; and
· to secure operating funds for 2005 and beyond in order to meet the rising demand.

To date, loan capital has come from individual donors and foundations, totalling over $200,000. Operating capital consists of a $40,000 yearly grant from the City of Ottawa, a three-year Ontario Trillium Foundation grant, some corporate sponsorships and private donations, as well as fees and interest from loans. CEDTAP was instrumental in supporting the development of our “Share the Wealth” Campaign by the cost sharing of a development consultant with us. It is this sort of “leverage assistance” that benefits an organization like the OCLF.

For Further Information, Please contact: Bruce Linton, Chair or George Brown, Managing Director, Ottawa Community Loan Fund, by phone at (613) 594-3535 or by email at info@oclf.org, or visit their Website at www.oclf.org.

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