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Never Say Die Entrepreneur

Noemi Prado is stubborn – so much so that in 2006, she refused to let the business she worked at for 27 years close, leaving 60-plus employees – and herself – without jobs. So she took action. As general manager of the Sun Valley picture frame manufacturer then named Southwest Mill and Lumber, she bought the business. It meant taking out a $1 million loan, putting up several properties she owned personally as collateral, and dipping into her own retirement savings for additional capital. That was risky to say the least, as Southwest was bleeding money and the owners had just sold the building, leaving Prado and the employees with nowhere to work. “I took over the business to save my employees’ jobs because they worked for me for so many years,” Prado, 53, said. “It was a good reason to do it to save the jobs, but I had a vision that if I really scarified, I would make it work.” The alternative lending agency that in 2006 provided Prado the life-saving $825,000 loan, the Valley Economic Development Center Inc. in Sherman Oaks, just recognized her with its Entrepreneurial Vision award last month as owner of the renamed Southwest Moulding Inc. It’s an award VEDC gives out only once every five years. The organization recognized Prado because despite having to initially downsize the business and its labor force, she saved jobs through the transition and the Great Recession, said Lisa Winkle, VEDC’s director of marketing and communications. “It recognizes somebody who is obviously an entrepreneur but sees potential and is not afraid to go after it,” Winkle said. Capital hurdles Southwest carves long blocks of wood into intricate frames that customers use for art and photos, which get sold to home décor retailers such as HomeGoods Inc. Prado bought the business from the Aaron brothers – the founders of the art and framing retail chain. A Mexican immigrant and now American citizen, she started at Southwest in 1979 in the entry-level position of assistant to a wood molding machinist and was general manager for about 15 years when the remaining brothers, Len Aaron and the late Charles Aaron, wanted to retire and planned to close the business, she said. “The reason why they sold is they made millions ($11 million) on the building, and wanted to liquidate the business because China really impacted us,” she said. To buy the business, Prado needed money. She knew banks were not likely to give her a loan because the business had no collateral – no money and no building – to put up against the loan. Prado’s other hurdle was that banks look at businesses with new owners as startups, even if the businesses have been around for a long time, said Lynn Fernandez, vice president of lending for VEDC. As a rule, banks want three elements – sufficient collateral, cash flow and credit. Fernandez said Prado had good credit, enough collateral between the buildings she owned personally and money from her retirement savings, satisfying the two criteria of credit and collateral that VEDC required. “She put in her equity piece into the purchase of the business,” Fernandez said. “She was able to maintain the existing client base – that helped her and that helped us. That gave us the reassurance that she had enough accounts.” Prado had overseen two company moves successfully, and the Aaron brothers agreed to help with the transition, she added. But a priority was saving the 40-plus jobs. Work in progress Taking on the business meant tough decisions, starting with slashing overhead costs for real estate, inventory and labor. Southwest had operated in a 65,000-square-foot building that it owned, and was used to buying enough inventory to fill it. Prado had to lease a building, and so quickly moved to one that was only 35,000 square feet. It meant spending $425,000 in construction upgrades and another $94,000 for a generator to run the machines while the electricity was upgraded. Prado also began “watching pennies.” She slashed what was being spent on inventory to $15,000 from $50,000. “When you are big, you don’t see everything, but when you are small, you see everything; and when you’re the owner, you see even more,” she said. The hardest part was reducing the 60-plus person labor force. Prado asked all the employees to reapply for their jobs, and about 40 returned applications, a number she could afford. Since then, Southwest has expanded into new categories and products. Rather than just carving picture frames based on customers’ own preferences, the company now creates original patterns and unique colors that Prado designs, such as the new barn wood collection that mimics the look of distressed wood. But the effort has not been without sacrifice. Prado makes less money as an owner than she did as an employee. She still owes half the loan amount to the VEDC and her properties are still the collateral. And a customer who declared Chapter 11 bankruptcy owes her $90,000-plus. Still, Prado says she loves what she does. “It’s not about money; it’s about being productive, creative and part of something positive,” Prado said. “I’m very stubborn, so I’m not giving up yet.”

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