PACOIMA — A month after the faltering Los Angeles Community Development Bank shut down its office in the San Fernando Valley, area businesses are anxiously awaiting loans that could determine whether they will thrive or have to cut jobs.
Three Pacoima businesses were among those who hitched their futures to the low-interest lender: a sign maker whose building was destroyed in the Northridge earthquake, a car parts manufacturer that needed money to avoid being swallowed by larger competitors and a bungee cord distributor that had to turn away millions of dollars in business because its three remaining employees were unable to fill all the orders.
Each of the business owners said loans from the Community Development Bank, which closed its Pacoima office, meant the difference between making millions and shutting their doors for good.
The bank, whose assets are federally guaranteed, was formed in response to the 1992 Los Angeles riots to stimulate business growth in depressed areas of the city. It has distributed $120 million in five years, through loans with interest rates of 2% to 4%.
Because of a $24-million loss on a bad loan and a $9-million judgment against the bank, it has cut its staff in half, closed its satellite offices and curtailed most of its lending activity. The businesses in need of new loans from the bank are in limbo, hoping the bank will rebound in time to save their companies.
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Michael Lavallee, owner of Lido Bungee, said at one point he returned a shipment of goods because he could not pay for it. Lavallee had placed the order in anticipation of funds the bank approved nine months earlier but had not released. Near financial ruin, he laid off all 13 of his employees, leaving just his wife and son.
"It was a long time before we got the money," Lavallee said, "but we never gave up. I'm either too obstinate or too stupid. I had 40 years in the business riding on this, and I knew we could go to $50 [million] or $60 million [in sales] if we had the capital behind us."
Since Lavallee received the funds, his business has grown to about $20 million in annual sales. His plans for another expansion are tangled in the dealings of the Community Development Bank.
"Stores like Wal-Mart and Sam's Club buy 17 million of these [bungee cords] a year," Lavallee said. "Without capital, I can't keep up with competition, because we have to buy now, ship and wait until we get paid later."
