Small But Mighty


Jason E. Kaplan
Jelana Canfield in her Beaverton bakery

Microlenders have stepped in to support small businesses traditional banks do not serve — helping marginalized entrepreneurs get their businesses off the ground.

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Jelana Canfield’s baking business was supposed to be a side hustle.

After graduating from Mills College in 2000, Canfield decided she would make and sell pies, cupcakes and cinnamon rolls to help pay the bills while pursuing a career as a dancer and actress. But after moving to Hawaii for her husband’s job, she worked at Morimoto Maui with Masaharu Morimoto, who hosted the popular Japanese cooking show Iron Chef and its U.S. spinoff, Iron Chef America. The experience made her fall in love with food.

“I got a better understanding of wine and actually thought I was going to go down the sommelier path, but I brought in some cookies for a holiday party and everyone’s mind was blown,” Canfield tells Oregon Business. “I brought in a vegan recipe, and people told me they were just as good as the other version. A restaurant owner took me aside and said I should really consider doing this professionally.’”

Canfield moved back home to Oregon after her mother was diagnosed with Parkinson’s disease in 2016. In September of that same year, Canfield started selling homemade baked goods and tortillas to make money on the side. Business picked up dramatically after the COVID-19 pandemic shut down restaurant dining: Her online sales went from just 15 invoices before the onset of the pandemic to 716 by the end of 2020.

That surge in sales — along with the loss of her job as a special education teacher’s assistant in Hillsboro School District — made her decide, in 2020, to finally take the advice she had gotten in Maui. She became a full-time pastry chef and business owner.

0423 microloan 556A4593Jelana Canfield looks at a wall hung with family photos in her Beaverton bakery.  Photo by Jason E. Kaplan

Canfield spent the next two years growing and promoting her business, but by 2022, was starting to feel the limitations of running a bakery from home. Though she had once fulfilled a 4,800-cookie order from Port of Portland, she was forced to turn down larger orders, including one from Genentech’s Hillsboro campus.

She decided it was time to open a storefront. But although her business generated $6,500 in sales each month, Canfield didn’t have the wealth or collateral to qualify for a typical small-business loan to rent a dedicated space and expand.

Then she discovered Micro Enterprise Services of Oregon and took out a $150,000 loan — using her mother as a guarantor — to open a bakery in Beaverton.

Microfinancing might seem like small potatoes at first. Microfinancing institutions (MFIs) offer loans ranging between $5,000 and $200,000 that business owners can use to buy a big-ticket piece of equipment, software or machinery, hire an employee — or afford some other up-front investment in the business. Lenders often pair the loan with some business coaching from the financial institution. For small businesses looking to grow, microloans are a more accessible, less risky option to turn a small business into a medium-size one. For traditional banks, microloans aren’t profitable. But they serve as a bridge for people who don’t always have access to traditional loans — women and people of color.

In Oregon microlending has its champions. In April 2022, Umpqua Bank deployed $1 million in microloans through a partnership with Kiva, an international crowdsourced microfinancing platform, aimed at building capital for historically underserved entrepreneurs and their communities. This year 20 small business owners in Marion, Polk and Yamhill counties are taking classes through the Latino Microenterprise Development Program, a collaborative microfinancing effort launched this year by the Latino Business Alliance. Since 2011 MESO has made 1,728 loans totaling approximately $15 million.

MESO business development director Jataune Hall says that the COVID-19 pandemic — which created a surge in applications for new small businesses — has increased the demand for microfinancing. Since 2020, MESO has grown from 15 to 48 employees, and opened a sixth location in Talent.

“In Oregon we are very well known for small businesses. There are tons of food trucks and other small businesses here, and most people can’t go to a traditional bank and get a startup loan. Those mostly don’t exist anymore, so that plays into it,” Hall says.

SIDEBAR: MICROLOANS UNDER THE MICROSCOPE

Natalia Ibarra, manager for U.S. partnerships at Kiva, says her company’s metrics also show a surge in the demand for microfinance options. Kiva deployed 120% more funds through its crowdfunding platform in 2022 compared to 2019. Kiva can’t make the same-size loans of more traditional MFIs, but Ibarra says the fact that the loan is 0% interest, and is financed directly by community members, means Kiva serves a valuable role in the microfinance ecosystem.

MESO began under the umbrella of the Black United Fund in 2005 to assist small businesses experiencing challenges in the wake of gentrification in North and Northeast Portland; it incorporated as a separate institution in 2008. The organization now offers lending and other business-support programs — including business education, financial planning, and marketing and accounting assistance — to businesses throughout Oregon and Southwest Washington.

MESO offers SBA loans as well as other forms of financial assistance, including grants. Kyle Lovell, credit manager at MESO, says the organization has never had more than 2% of its total portfolio more than 60 days past due or at risk of going into default at any given time. She says that due to the relatively thin profit margins of microlending, the organization needs to maintain close, educational relationships with its clients to make sure repayment happens promptly and consistently.

0423 microloan 556A5250MESO’s Kyle Lovell.  Jason E. Kaplan

“When you ask how we can afford to do this, the answer is that, while it’s not profitable, it’s the benefit of being a nonprofit,” says Lovell. “We work with various community organizations, government entities and municipalities, traditional banks and other alternative lenders that provide funding for this type of work.”

According to Lovell, around 71% of MESO’s loans have gone to BIPOC and women-owned businesses.

In addition to its microfinancing operation, in 2022 MESO launched a credit-building program for clients, which offers rapidly repayable $100 to $200 loans to help clients increase their credit scores. Hall says that for some communities, paying cash up-front for most purchases is the most common way of making purchases — which can decrease their credit scores or mean they don’t have a credit score at all. That can jeopardize their access to traditional loans.

Microlending also has a dark side. Without proper business education and oversight, small loans can become predatory, especially given that they come with higher interest rates than larger ones. In the developing world, some microfinancing operations have been criticized for their impact on the populations they are supposed to help.

According to a 2019 report by the Cambodian League for the Promotion and Defense of Human Rights, the country’s experiment with microfinancing — which took off in the early 2000s after several successful experiments — had turned predatory, due in large part to the presence of for-profit microfinancing institutions throughout the country. The report found more than a million land titles were held by MFIs, and that 10% of all MFI loan repayments were made using forced land sales involving local authorities. A separate report from the International Monetary Fund cited that government intervention had been insufficient to address the problem — when the country’s National Bank imposed an 18% rate cap in 2017, lenders increased loan sizes and tripled commission fees.

Canfield’s loan from MESO has a 9.5% interest rate; that’s higher than the 7.99% U.S. Bank offers as a beginning interest rate for loans up to $250,000, but comparable to rates for Small Business Administration loans, which are higher for smaller loans and have routinely topped 10% since the Federal Reserve’s December rate hike. She says the cost is something her growing business can manage, considering the loan’s relatively small size. Without microfinancing — and the business coaching and support offered by MESO — Canfield says her dream of opening her own bakery may never have come true.

“At my home bank, I didn’t even qualify for a business credit card,” says Canfield. “I’ve been in the restaurant business long enough to know it’s a gamble, but I’m grateful. Things could have been a lot worse with other forms of lending.”

0423 microloan 556A4850Black Star co-founders (from left) Devin Parks, Liz Loving-Maurice and Jafar Maurice.  Jason E. Kaplan

Liz Loving-Maurice and her husband Jafar were denied a business loan by multiple banks when they sought financing to start Black Star Athletic Academy, a Portland athletic club that also offers mental health support services. MESO gave the company its best chance to pay the heavy costs that went into opening a gym.

A counselor and former track runner, Loving-Maurice says she experienced firsthand how stress levels and anxiety were detrimental to her physical performance, and caused burnout for young athletes trying to use sports to be able to afford college. She says she co-founded the academy in part to bridge mental health and athletic training — something she says is vitally important to young athletes trying to use sports to improve their futures.

“Most of these kids are around 14 and 15 when the pressure starts, and these mental health symptoms are very loud — but they often go untreated, undiagnosed and undetected because they know how to hide. A lot of times, there’s stigma around mental health,” says Loving-Maurice. “Our coaches are trained enough to see the symptoms and kind of alert me or the parents if they have concerns.”

In addition to the financial and business information they had to provide, the couple and their other two co-founders needed to produce collateral, which Loving-Maurice says was the most difficult part of the process, and not something she expects every BIPOC entrepreneur to be able to do.

0423 microloan 556A4978Liz Loving-Maurice, co-founder of Black Star Academy.  Photo by Jason E. Kaplan

“As a Black business owner, historically we have been denied access to owning assets in a structural way because of the racism that has happened in our country and definitely here in Oregon,” says Loving-Maurice. “I understand you’re trying to mitigate risk, but you’re asking Black people to put up their house as collateral and have 30 to 40 thousand dollars in the bank for a $50,000 loan. It just doesn’t add up when a lot of Black people don’t own homes and sometimes have large debts.”

She says that if MESO wants to continue to build wealth among Portland’s Black community, it may have to review and rethink the requirements necessary for eligibility. She warns that unless new financing methods are developed, microloans will not be going to the business owners and communities that the spirit of microenterprise is meant serve.

“If the intention is changing the racial dynamic and cultural identity of the community, my only feedback would be to look over the criteria,” says Loving-Maurice. “Otherwise, it’s going to be Europeans getting these loans. You won’t get many Black people, even if they have million-dollar ideas. You barely got us through the door.”

One option for asset-light business owners looking for a microfinancing institution is Kiva, a crowdfunded microloan platform that makes loans between $1,000 and $15,000 to business owners. Umpqua Bank worked with Kiva to deploy $1 million in 0% interest microloans to nearly 200 BIPOC and women business owners this year as part of its Small Business Empowerment program.

One of those business owners was Holly Ong, who founded Sibeiho (literally “f—ing good” in Chinese) two years ago, after she and Pat Lau, her co-worker at Nike — where she had worked in the marketing department — decided to bring the flavors of Singapore to Portland in the form of a food and restaurant business. Ong took point running the business, since they couldn’t both afford to quit their jobs. Ong found herself intimidated by the process of navigating the financial system and taking out a small-business loan.

“Part of it, being Asian, is that we are culturally very averse to taking up loans and asking to borrow money,” says Ong. “But in order to grow, I need capital, and in order to get capital I had to borrow this big amount and that’s an additional stress.”

0423 microloan556A4783Holly Ong with some of her Sibeiho label products.  Jason E. Kaplan

When Ong needed an $8,000 loan to put a down payment on a delivery truck, a colleague at Xcelerate, an Oregon-based women’s-business accelerator, told her to apply for a microloan through Kiva. Paying back a small loan in $100 installments was less intimidating for her financially, so she applied. Ong’s microloan was selected to be part of Kiva’s Umpqua partnership. Within 48 hours, her loan was financed.

“I remember texting Amy, who runs Xcelerate, after our loan got funded, and she said, ‘That’s the power of grassroots-level help in the U.S.,’” says Ong.

“It has helped us realize the dream of sharing the food heritage that we have. As of now, we’ve won two food awards, and when we go to San Francisco, we are very proud to be part of the Oregon food system. I’m just looking to pay it forward now because I never expected it,” Ong says.

“We are growing in the U.S. every single year, particularly through partnerships like Umpqua. It’s really localized, regional institutions that are helping us reach those folks,” says Kiva’s Natalie Ibarra. “Particularly in the Pacific Northwest, you see it in rural communities that are typically in banking deserts and immigrant communities that don’t have those initial couple of years of revenue. It’s really in those communities where you see microfinance flourishing.”

Ibarra says that of all businesses funded through Kiva, 50% go on to receive a bigger loan from a larger institution — something representatives from MESO and Kiva affectionately referred to as “graduating.”

While the main draw of microfinancing is its ability to help businesses in their most vulnerable stage of development, the lower cost structure of microloans means they can be an asset to businesses at many stages of development, especially seasonal businesses like wineries, which do the bulk of their business during warmer months.

0423 microloan Q201107 287copyQuinton Jay is the founder and managing director of the Oregon Micro Fund, which makes loans ranging from $5,000 to $250,000 to farms, wineries and other businesses, with a particular focus on the beverage industry. Jay says his interest in microloans came from his experience as a wine and spirits retailer. After his initial investment in his business, he says it was nearly impossible for him to secure additional financing without incurring major risk.

Jay says his wife was uncomfortable putting up their house as collateral for a bank loan, and that alternative financing options — like QuickBooks and Shopify Capital — weren’t as cost-effective for a seasonal business.

“My biggest cash need was in November and December. I don’t need the money in January, since I’ve sold all the stuff. But then I would have to keep carrying that loan for the next four months. This meant I was giving free money to people, which made me kind of grumpy,” says Jay. “Eventually the cycles become bigger; then all of a sudden, you’re doing $1 million in business, your working capital needs get greater and that money has to come from somewhere.”

Jay eventually found investors willing to loan him the money he needed, but he realized his predicament was one facing many wineries and seasonal businesses. He founded the Oregon Micro Fund in 2017 as a way of serving the needs of Oregon winemakers needing to purchase equipment — as well as other growers, including the Seely Mint farm in Clatskanie.

The Oregon Micro Fund isn’t Jay’s full-time job. He says the fund only generates between $30,000 and $40,000 in revenue each year, which he reinvests. But with high interest rates and banks more reluctant to offer small loans, he says more and more people have approached him about using microfinancing to help grow their businesses. He says he has been contacted by the M.J. Murdock Charitable Trust, a Pacific Northwest grantmaking organization, to bring microfinancing groups together, though those efforts to organize microfinanciers are still in their infancy.

“Microfinance is a small community. It’s sort of that middle step between your friends and family giving you money and a third party getting you money,” says Jay. “When I get the money back, I immediately invest it in someone else. No one makes a gazillion dollars doing it, but these are good karma credits in heaven.”

Since receiving her microloan, Jelana Canfield has opened Jelana’s Bake Shop, a brick-and-mortar bakery in Beaverton. She’s hired three employees and created a separate baking area with separate ventilation for her gluten-free pastries to avoid cross-contamination during the baking process. Being able to accommodate dietary restrictions can be important for large corporate orders.

Canfield says her business hasn’t broken even yet — but most bakeries don’t until they’ve been open for at least three years, according to cloud-based restaurant management software company Toast. But her growth is steady. In December of 2022, sales were up 56% compared to December 2021. In January of this year, sales were up 35% compared to January 2022 — though January is typically the bakery’s slowest month.

Canfield had to take out a second, $30,000 microloan from MESO after a contractor project stalled due to illness. She is still making payments on it, along with her original loan.

She says her time in the restaurant and hospitality business has taught her that nothing is a guarantee. But a solid foundation of business skills and manageable loans has given her business its best bet to succeed.

“I’ve been in this industry long enough to know this is a big gamble,” says Canfield. “But if I am going to do it, I’m going to do it right.”

Editor’s Note: The print version of this story, which ran in the April 2023 edition of Oregon Business, erroneously referred to Canfield’s 4,800-cookie order as being from Intel, not the Port of Portland. The print story, and a previous version of the web story, also misspelled Natalia Ibarra’s name and contained inaccurate information about Kiva’s growth: the organization estimates that it deployed 120% more loans in 2022 than 2019, not 78%. Oregon Business regrets the errors. 


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