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www.HartfordBusiness.com September 21, 2015 • Hartford Business Journal 3 HEDCO sails ahead with new hands on the tiller By Gregory Seay gseay@HartfordBusiness.com F orty years ago, a nonprofit microlender, with encouragement from Hartford's insurance-industry "bishops'' and a $7,500 stake from the city, was birthed to fund loans that were just too small or too risky for traditional financiers. What began as the Hartford Economic Development Corp. — now known as HEDCO Inc. — has evolved into the biggest small-busi- ness, nonprofit and microloan financier of its kind in Connecticut, one with a more than $25 million portfolio of loans and a multi-million- dollar bank line of credit. Along the way, HEDCO, too, has cemented ties with many of Connecticut's commercial banks, eager partners for financing loans to microborrowers whom HEDCO not only vets but nurtures with technical support and training. It has proven a profitable arrangement, HEDCO officials and its advocates say. The local, regional and state economies benefit from HEDCO borrowers' creation of jobs and purchas- es of goods and services. Also, HEDCO's lending resume and network of business contacts grows with each repaid borrowing, officials say. But perhaps even more important to HED- CO's bank partners is the opportunity to show banking regulators that they are living up to their mandates to seed economic development in the communities they serve, particularly to low-income or underserved borrowers. "HEDCO is not only about lending,'' said Fernando G. Rosa, a 36-year HEDCO officer who ascended to the CEO/executive director chair with the August retirement of long-time predecessor Samuel Hamilton. At the close of fiscal year 2014, HEDCO had net assets of $11.5 million, according to its IRS Form 990 filing. In fiscal 2014, HEDCO had revenues of $2.2 million, down from $3.6 million in 2013. Its fiscal 2014 margin fell to $173,376, from $1.1 million a year earlier. Indeed, HEDCO's umbrella harbors 22 busi- ness-development, training and related pro- grams. One of those is its Business Resource Center housed in the same building at 15 Lewis St. downtown as its headquarters. There, aspiring entrepreneurs share cubicled office space from which they run their operations. The resource center also is where female and minority contractors and their employees get instruction on construction and job-site stan- dards leading to their certifications under the fed- eral Occupational Safety and Health Act (OSHA). Launching the resource center in 2006 was a response to the persistent refrain from aspiring entrepreneurs about the need for coaching beyond how and where to get a loan, Rosa said. They also coveted knowing more about how to land and manage public and private contracts; write an effective business plan; read a spreadsheet, along with bookkeep- ing and marketing, among other needs, he said. "They have the skill set to do the [contract] work, but don't have the skill set to do the back- office part of it,'' said Kim B. Hawkins, who oper- ated her own masonry-contracting business in Hartford for 22 years before joining HEDCO. Hawkins ran the resource center its first nine years, until her August promotion as HEDCO's chief operating officer. It is HEDCO's commitment to serving Con- necticut's small- and minority-business commu- nity, plus the stability of its leadership, that has made it such an asset, says Jose Mendoza, CEO of Hartford's Spanish American Merchants Association (SAMA), another HEDCO partner. "We've had a great partnership throughout the years,'' Mendoza said, adding that HEDCO's recently-retired CEO, Sam Hamilton, "was a great advocate for the Hispanic community.'' Having seasoned hands in Rosa and Hawkins take the reins from Hamilton, who was only the second CEO in HEDCO's his- tory, makes it "really a seamless transition," Mendoza said. "I'm hoping they will continue to be the same,'' Mendoza said. "They are responsible for a lot of small businesses being in business.'' Consistent leadership Catherine Smith, who heads the state Department of Economic and Community Development, says HEDCO, too, has been an invaluable lender-partner to her agency. Working closely with DECD, HEDCO suc- cessfully lent about $2 million to small-busi- ness applicants as part of the state's Express Loan program, and is in line to receive anoth- er chunk of lendable funds, she said. But it is HEDCO's deep connections that have opened doors for DECD into minority businesses in some of the most economically hard-hit corners of the state, Smith said. "We'd love to see a HEDCO in every major metropolitan area in Connecticut,'' the DECD commissioner said. Contributing to HEDCO's legacy is the continuity of its leadership, insiders and advocates say. Only one other person had helmed HEDCO for 20 years prior to Hamil- ton, who's CEO term also lasted two decades. Barbara Randolph is a West Hartford finan- cial adviser who has chaired HEDCO for about three decades. Randolph says HEDCO's 30-mem- ber board opted to promote Rosa and Hawkins because directors were comfortable with the pair's knowledge of the lender's internal culture and diverse network of community contacts. "It's a strong organization. It is fiscally sound,'' Randolph said. "It's recognized as a premier organization by all who have come in contact with it.'' According to Rosa's estimates, at least two out of every three restaurants in the Hartford region have turned to HEDCO for financing. Due to the food-service industry's transitory nature, banks are hesitant to lend directly to operators. HEDCO regularly participates with area lenders to finance small-business operations or their projects. For example, Rosa says, a HEDCO client needs a $500,000 loan. So, a local bank partner steps up to stake $350,000, on condition that HEDCO commits to funding the balance. The HEDCO borrower not only gets the loan, but in the process a handful more mile- stones are attained: HEDCO has helped a needy client, while booking another money- making credit. Meantime, the partnering bank, too, has made a potentially profitable loan and established a blossoming banking relationship with the borrower — one that it can showcase to bank regulators. Like most lenders, HEDCO insists when- ever possible that borrowers put up between $1 and $1.50 worth of collateral for every $1 lent, to recover its investment. In a 12-month period ended June 1, 2014, HEDCO's chargeoffs of uncollectible loans was $465,138, or 1.9 per- cent of its $24.9 million in outstanding loans, according to its audited May 2014 and 2015 financial statement. Year-earlier charge-offs totaled $585,437, or 2.5 percent, of its $23.8 mil- lion in loans outstanding. Len Suzio, founder and CEO of GeoDat- aVision, a Wallingford bank consultancy specializing in regulatory compliance, says HEDCO has been an effective lever for banks in fulfilling their federal Community Redevel- opment Act requirements. The law mandates that banks be active, equal-opportunity par- ticipants in developing and supporting the economies in communities where they are headquartered and/or have branch offices. Failure to satisfy CRA obligations can subject a bank to extra scrutiny from bank- ing regulators, especially if one lender wants permission to acquire or merge with another. A poor CRA record can prompt regulators to scuttle a deal, or to at least extract specific CRA commitments from the successor. "The potential for HEDCO is far greater than what its actual achievements have been,'' said Suzio, a former Connecticut lawmaker. Deep roots HEDCO was started in 1975 at the urging Continued HEDCO Inc. CEO Fernando Rosa and Chief Operating Officer Kim Hawkins flank Barbara Sanchez, office manager for Farmington Valley Wall Concepts LLC. Farmington Valley Wall is a client of HEDCO's Business Resource Center. H B J P H O T O | G R E G O R Y S E A Y www.kelsercorp.com 111 Roberts St, Suite D East Hartford, CT 06108 860 610 2200 2.5 billion - records exposed in the past 5 years. How secure is your network? www.kelsercorp.com/cybercrime