Non profit small business lender TruFund Financial Services, formerly known as Seedco Financial Services, has emerged from a difficult period and is stepping up lending this year, having already approved $5.8 million worth of loans for 2013 so far, Crain’s reported.
The institution, which focuses on small business loans in under-served communities, saw lending fall from $13 million in 2011 to $6 million in 2012 as it focused energy on splitting from parent company Seedco. A national nonprofit, Seedco was sued for civil fraud last year by federal prosecutors. Seedco declined to comment to Crain’s about the split with Seedco Financial.
Cristina Shapiro, vice president in the Urban Investment Group at Goldman Sachs, which made a $20 million grant to TruFund in 2009, told Crain’s that the slowdown in Seedco’s lending left a gap in the market for small businesses looking for financing. “These are loans to businesses that traditionally can’t get loans,” she told Crain’s.
The New York Times broke a story in August 2011 that said the nonprofit falsified reports to the city while contracted to run two federally funded job-placement centers in upper Manhattan and the Bronx. Federal prosecutors then sued Seedco in late May 2012, saying the nonprofit filed 528 phony claims. A $1.725 million settlement was reached in December, according to court documents cited by Crain’s.
Now that big banks are increasingly approving small-business loans at higher rates, TruFund could face stiff competition, Rohit Arora, CEO of Biz2Credit, told Crain’s. But TruFund’s specialization – loans between $50,000 and $750,000 at 8 to 10 percent interest, primarily for entrepreneurs who can’t qualify for traditional bank loans – could work in its favor. [Crain’s] – Julie Strickland