I recently decided to take a tour of the small business funding labrynith – a monumental task that I’ve dreaded.  I guess I’ve always had visions of sitting – hat in hand – in front of a bureaucratic, unempathetic, functionary who only loans money to folks who already have it.  I’ve often thought it would be easier to rob a chain of liquor stores – not to mention more successful.

So it was such a pleasant surprise when I met with Ednita Glavan, a loan officer at Accion MicroLending of Texas, who is so passionate about helping small businesses that she is actually looking for clients to help.  She explained that, as a non-profit organization, Accion spends very little funds on advertising – preferring to lend that money to clients, instead.  How refreshing!  As a result, Accion is just about the best kept secret in Texas.

These folks do their homework.  For example, rather than flatly rejecting loan applications that fall below a minimum credit rating, they review the applicant’s history to determine the factors contributing to that rating.  As Ednita explained, they are a variety of rating criteria that don’t necessarily reflect an applicant’s creditworthiness – there’s a big difference between late payments and collections activity.  On the other hand, one of her clients enjoyed a terrifically high credit rating but was on the verge of bankruptcy – a situation that had developed over the previous six months and had not yet been reported.

Their collective willingness to spend time to listen to each applicant’s story resulted in the American Banker’s 2008 Innovator Award to Janie Barrera, president and chief executive officer at Accion Texas. A few excerpts:

Barrera is the founding president and chief executive officer of Accion Texas. Under her leadership, Accion Texas has become the largest microlender in the United States with a portfolio of more than $20 million. Operating in a niche that banks have struggled to penetrate — average loans come to about $16,000 — the organization has put up growth and performance numbers that point to the microfinance segment’s still largely untapped potential.

A portfolio deal reached with Citigroup this year shows how Accion Texas is changing the state of microfinance in this country. Under the terms of the agreement, the first of its kind in the U.S., the banking company committed to purchase up to $30 million in loans originated by Accion Texas over a five-year period. Accion Texas originates and services the loans and Citi shares in the risks — and the profits — generated by the portfolio.

Importantly, loans from Accion Texas are not handouts. Under Barrera, the organization has made financial education a key component of its customer relationships and low loss rates have been one of its trademarks. Its portfolio at risk, the portion of its portfolio delinquent by more than 30 days, was an impressively low 4.2% at the end of 2007.

Innovation at Accion Texas goes well beyond the Citi transaction. The organization has developed its own proprietary lending platform and in 2007, it began providing underwriting, online application, and other loan services to other microlending institutions nationwide.

“Janie Barrera and Accion Texas are showing that microfinance has a legitimate place as a business enterprise in the United States,” said David Longobardi, editor in chief of American Banker. “Their application of technology, business acumen, and hands-on service are putting credit in the hands of entrepreneurs that in many cases would otherwise be overlooked.”

Please refer to “Accion MicroLending” page to learn more about their criteria and contact info.