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Loans based on character, not credit history

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Story originally published on the W.K. Kellogg Foundation website.

More than 20 years ago, James Eustace started making jewelry as a teenager while living on the Pueblo de Cochiti, a Native American tribal land located 35 miles southwest of Santa Fe, New Mexico. The art of jewelry making was a tradition in Eustace’s family and a way to keep their culture and traditions alive.

But when his mother died in 1991, Eustace found himself in the role of caretaker to his two younger sisters and he turned to jewelry-making as more than a craft: it became a livelihood.

Eustace quickly discovered that starting and running a small business while trying to support his family was no easy task. The jewelry-making tools his mother had given him were outdated and he couldn’t afford new supplies.

“You gotta purchase everything when you’re doing your art, whether it’s sterling silver, stones or equipment,” said Eustace, who estimated that nearly a third of all his profits go toward purchasing supplies.

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Glass artist Adam Frus places a piece neatly on the display after making a sale at artist co-op Genuine Southwest Art & Gifts in Old Town Albuquerque, New Mexico.

In search of financial assistance, Eustace turned to Accion, a nonprofit organization based in Albuquerque that offers loans to business owners and aspiring entrepreneurs using a unique credit rating system that differs from traditional banks. Accion in New Mexico is one of four members of the Accion U.S. Network, a longstanding pioneer in microlending.

Accion granted Eustace a $2,500 loan that helped him purchase the new buffing machine and branding equipment he needed to produce his traditional style leaf jewelry and expand his business, while caring for his younger sisters. Through this financial support, Eustace is making and selling jewelry to customers around the world.

“I can say I have [my] jewelry on every continent,” said Eustace. “And that’s pretty neat.”

Success stories like Eustace’s are plentiful in Accion’s 20-plus year history due to the organization’s focus on promising small business owners who are often unable to obtain a traditional bank loan. While traditional lenders may rely on criteria like credit score and collateral to determine credit-worthiness, Accion’s “character-based” lending approach also looks at the strength of an applicant’s business plan, his or her ties to the community and reference checks.

In the past 20 years, Accion, which has grown to serve entrepreneurs in five states, has made 9,515 loans totaling more than $83 million. The organization’s efforts are part of a larger strategy in Albuquerque to stimulate business growth and job opportunities among city residents by connecting business owners to funding sources, tax credits and training programs.

“The best path for economic mobility in any city is to help individuals from underrepresented communities become successful business owners.”

Gary Oppedahl, director of the Economic Development Department for the City of Albuquerque.

For many entrepreneurs like photographer Valerie (Val) Isenhower, a loan can provide more than a leg up to launch an idea: it can provide the opportunity to expand a business into a new venture altogether.

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Val Isenhower chats with customer Ronald Charlton at the artist co-op Genuine Southwest Art & Gifts in Old Town Albuquerque New Mexico.

As with Eustace, Isenhower initially came to Accion three years ago when she couldn’t afford supplies for her photography business and didn’t qualify for a traditional bank loan. The assistance helped her participate in her biggest revenue-generating event of the year— the Albuquerque International Balloon Fiesta, also known as the most photographed event on earth.

However, she had bigger plans.

Isenhower returned to Accion for a loan to cover her share of “Genuine Southwest Art & Gifts,” an art gallery she started with nine artists in 2013. All the artist-partners sell their artwork from the gallery, which has since grown to 32 artists. Like Isenhower, many are single women who are now able to better support their families, she said.

“For us as single women, being able to have a business and having Accion be a big part of that is life-changing,” said Isenhower, who has gone on to become a donor to Accion and help other entrepreneurs realize their dreams.

“A loan does make a difference.”

Val Isenhower

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