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Front Row Seat: Chief Of State's Largest Community Lending Agency

Mara Lee

June 07, 2010

Donna Wertenbach, the CEO of a not-for-profit lender that operates statewide, talks fluidly about cash flow, debt service, risk exposure — the kind of language you'd expect from someone who extends credit to businesses.

But Wertenbach, who took over the Community Economic Development Fund in 1998, five years after its founding, speaks about the economy and her clients with a passion not usually associated with bankers.

"We are going to stand behind our clients, come hell or high water. That's what we do," she says.

In January, when she spoke at a small business forum in Hartford's North End sponsored by U.S. Rep. John Larson, D-1st District, she loudly scolded the Small Business Administration and Congress for not acting urgently enough to respond to the recession.

And a few months later, when there'd been no movement at all on changing Small Business Administration microloan limits first proposed in September, her voice rose as she said: "We've been giving lip service for a year. We are dealing with people's lives here! Do they not get, in a recession, we lose our economy a day at a time? These are simple strategies that cost the taxpayer bupkis!"

No one could ever accuse Wertenbach, 59, of being all hat and no cattle when it comes to small business. She cajoles banks to invest hundreds of thousands of dollars in her lending pool. She wheedles politicians for policy changes and funding. She asks probing questions about business growth plans with potential borrowers. And when folks come with unrealistic expectations — not wanting to use their house as collateral for a loan, or without enough business experience to start a restaurant — she doesn't mince words with them, either.

If anything, she's modest to a fault. When a state legislator called her an authority in developing entrepreneurship among low-income women back in 1992, and praised her success rate, Wertenbach replied, "We've been very fortunate."

Six months have gone by since the North End forum, and the SBA changes still haven't come, though Connecticut did dedicate an additional $15 million to small business loans. Some of that money was to be sent to CEDF and similar nonprofits. Meriden's CEDF is the largest, but about a half dozen lenders serve low and moderate income entrepreneurs, as well as small businesses in distressed towns and cities. A month after the bill passed, the department of Economic and Community Development has not decided how much it will distribute to those lenders.

In good times, it was start-ups and microbusinesses that came to CEDF. The fund made more than $4 million in loans in 2009, up from $2.8 million in 2008 and $3.1 million in 2007.

"The purpose of CEDF is to serve small businesses who cannot get credit from banks," she said.

Last year, the organization suddenly saw an influx of businesses they hadn't seen before, like factories with dozens of workers. The banks that CEDF partners with called her last year, saying they weren't willing or able to help those firms as their sales plummeted and asking CEDF to "catch them."

Wertenbach, whose agency has a higher risk tolerance than banks, said there were "hundreds and hundreds and hundreds" of businesses like this in Connecticut in 2009, whose credit lines were pulled, whose credit card limits were cut, or whose credit card rates were jacked up, and, with revenues dropping, they couldn't make payroll.

"I had the saddest conversations with people," she said.

But most of the time, she couldn't help them.

Sometimes a factory was in a wealthy town, and therefore didn't meet her lending profile. Other times, "That hole that they've dug is so deep, there is no turning back," she said.

"What we sell is hope and opportunity. While you still have hope, come to us then. Don't come to us when you're packing the boxes," she said. "The sad part of this recession is by the time they get to us, it's too late. They're not salvageable any more. By anybody."

Even after they were told they weren't eligible, men would show up at the door. Sometimes if they couldn't get a loan, they would ask for a job (she employs 17 people, including business counselors, loan officers, an underwriter and a work-out specialist).

Wertenbach would bring them into her office, and listen to them, even knowing they'd never become a client.

"I've had more men sit on this couch and cry," she said.

Wertenbach's whole life prepared her for this crisis, when she had to be both comforter and judge.

Just after college, she became a missionary in Latin America. Even now, she goes on short mission trips to the Dominican Republic, and wears a delicate cross every day.

Then she did development work in Bolivia. When she returned to Connecticut, she founded the entrepreneurial center at what was then Hartford College for Women. The staff there helped hundreds of women on welfare start their own businesses. None ever went back on welfare, she said, even if their businesses failed.

Not just Profit and Loss

Community Economic Development Fund has $23 million in capital, with equity investments from the Mohegan tribe, 19 banks and the Connecticut Housing and Financing Authority. The lending is done through a for-profit corporation, and banks can sell their equity shares to other lenders if they want to exit. The money returned from loans — more than a million dollars a year — goes back out in loans, rather than as a profit to the investors.

The CEDF was able to increase lending last year where many smaller nonprofit lenders couldn't because Wertenbach started a strategy 10 years ago to move away from dependence on foundation and state grants.

NewAlliance Bank Senior Vice President James Bzdyra leads the lending division's board of directors, and has known Wertenbach for almost 10 years.

He called her a visionary because of her work to move the organization toward financial self-sufficiency.

Wertenbach is always soliciting small banks that would be interested in becoming investors. In addition to getting credit for community investment required by federal regulators, the banks can get new customers by partnering with CEDF.

"You have to develop the business acument of the business owner, and (develop) the business itself simultaneously," Wertenbach said.

Although CEDF offers 10-year-loans to make payments as low as possible, they never keep them on the books that long. Once the business is stable enough, a bank takes them on.

Bzdyra said Wertenbach had a remarkable depth of caring for clients.

He said she has the same mindset of service and dedication whether she's in Bolivia, the Dominican Republic or Connecticut. "She's on a mission," he said. She sees the people, "not just the number of profit and loss and the balance sheet."

Sometimes CEDF's intervention has kept businesses from closing. One woman-owned construction firm had arranged for a $40,000 line of credit for materials and salaries earlier this year, but the bank pulled its backing. In just 10 days, CEDF got the business owner the money. "She was hysterical on the phone," Wertenbach recalled. She told her: "Don't give up hope now. You have contracts! Don't panic."

"Clearly, there is no reason why she should be out of business," she said. "Her industry is starting to turn around. Now is not the time to let these businesses fail."

Veto Pro Pac, a three-person business in Norwalk that designs and markets tool bags, was one of the new clients in 2009, and if CEDF hadn't loaned to the company, its president said there would have been layoffs.

President Rob Wolter said the company's founder had taken out a home equity loan to launch the business. As sales grew, Veto Pro Pac had borrowed $200,000 from private equity investors who got a share of sales, which meant they were paying more than a 20 percent interest rate.

They had hoped to pay it off in 2009, but sales dropped 30 percent, as most of the bags were used by carpenters, and the bottom fell out of construction.

The loan from CEDF allowed the company to retire that debt and invest in new brochures and travel to trade shows to reposition their bags for the heating and air conditioning installation and repair market. Now that market is 30 percent of sales, the single largest segment.

"I think we would have not been able to go out to the new market it would've been a much more dire picture for us for sure," Wolter said. Now things are turning around — the first quarter of 2010 was up 74 percent from the same period in 2009. He expects to have $1.7 million in sales this year and turn a profit for the first year since the business began in 2002. The bags are made in China.

He described Wertenbach as "really down to earth. A really sharp business person. A really big advocate of small business."

He didn't know she'd spent her whole career in nonprofits and had never worked in banking.

"It is surprising because she bridges both sides so well, from what everybody tells me she holds a lot of sway over those (board) meetings."

Wertenbach is "not somebody that barks orders," Wolter said. "But somebody that commands respect and gets it."