“Discrimination Is Easy for Lenders to Hide”

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“Discrimination Is Easy for Lenders to Hide”

Dee Ann Espinoza used credit cards, personal funds, and other alternative funding to build her 30-person environmental consulting business.
Dee Ann Espinoza, founder and CEO of Espinoza Consulting Services. | Minesh Bacrania
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In a survey of more than 5,000 business owners, a Stanford GSB study found that Latino business owners often face discrimination when it comes to securing financing. Stanford Business interviewed four of these business owners, and this is one of their stories.

It never occurred to Dee Ann Espinoza that she’d be turned down for such a small loan.

The year was 2011, and Espinoza, founder and CEO of Espinoza Consulting Services, was seeking a short-term loan for her 1-year-old company from the community bank that her husband, Julian, had used for 22 years — one that predominantly served the area’s white community.

“They refused to lend to us, and I was flabbergasted,” she recalls. “They wanted us to put up our car and have our parents cosign. We had assets and zero debt, and they still wouldn’t write us a signature loan for $1,100. It can’t be proven, but we’re fairly certain the decision to not lend to us was based on our ethnicity. That kind of discrimination is easy for lenders to hide, since most borrowers would be embarrassed to admit that a bank won’t loan them such a small amount.”

It’s taken tenacity, creativeness, family, and finding the right lending partner.
Dee Espinoza

Espinoza, a past participant in the SLEI-Ed program with a master’s in anthropology from Arizona State University, had launched her environmental consulting firm in 2010 out of her home in the San Luis Valley, in rural southern Colorado. She had limited financing options. The mortgage lending crisis of 2006 had hit her hard, sweeping away her previous real estate investment business, her home, and her credit. Declining bankruptcy, she and Julian settled their debts.

“In the beginning, one project would pay, and I’d use it to fund the next one,” she recalls. “That’s how I operated for the first three to four years, funding anyway I could — using credit cards, saving profits, ‘hiring’ and borrowing from family and Julian’s business, deferring draws, and not being able to access traditional credit.”

By 2014, the situation was looking up. Her company received a certification from the Small Business Administration that enabled it to access sole source contracts from the federal government. She also took on a business partner, who allowed her to borrow from their traditional line of credit. In need of a building for staff, Espinoza obtained a mortgage from a local economic development planning agency with a carryback from the seller, and used her family home as additional collateral.

A year later, she bought the building next door after first securing a $30,000 Colorado economic development grant for rehabilitation and outfitting. She took that to First Southwest Bank, a traditional bank and certified Community Development Financial Institution, which consolidated the mortgages and provided a stopgap working-capital loan that enabled Espinoza to buy out her partner. It also provided a line of credit for $150,000, backed by the SBA.

Today, Espinoza Consulting Services has 30 employees in six states with headquarters in La Jara, Colorado. Espinoza hopes to open another office and is working with her bank to double the company’s line of credit. Thanks to receiving SBA certifications that target women-owned businesses and businesses in economically disadvantaged communities, Espinoza’s company now receives nearly 90% of its revenue through federal contracts.

“Last year we were at $1.6 million and, given current awards, this year we’ll easily double to about $3 million,” Espinoza says.

Financing is no longer a concern.

“First Southwest Bank is ready to lend to us personally on other projects and really sees us as partners in economic development — our bank actually gets excited when we bring them a new project,” Espinoza says. “It’s taken us eight years to go from cobbling together alternative funding sources to being able to get a sizable signature loan or an unsecured business loan in a few days. It’s taken tenacity, creativeness, family, and finding the right lending partner.”

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