How To Benefit From Your Company’s Commitment To Minority Companies | Way of life

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Since the start of 2020, companies from Bank of America and JP Morgan Chase to Google and Twitter have pledged billions of dollars to help entrepreneurs of color.

However, not all of these amounts go directly into the employer’s pocket. Many are invested in other financial institutions – in particular Community development financial institutionIts services include providing small business loans to borrowers underserved by traditional banks.

Martina Edwards, head of strategic partnerships with ACE, a CDFI that supports entrepreneurs in Atlanta and northern Georgia with low-interest loans, financial education, and business development services, said:

According to Edwards, supporting business and philanthropy “can speed up the work we do,” including increasing lending.

If you’re a business owner of color, here’s how these commitments can help.

Typically, corporate investment in CDFI takes the form of loan funds. CDFI can borrow from these funds at low interest rates and lend money to its clients.

According to the Treasury, the United States has more than 1,200 CDFIs, including banks, credit unions, loan funds and venture capital funds. CDFI specializes in the types of loans that banks can refuse. That is, a low interest rate retail loan to a borrower with a short credit history or limited collateral.

For example, the average loan from ACE’s Paycheck Protection Program is around $ 24,000, with 90% of the money going to businesses with five or fewer employees, and 67% going to black-owned businesses. , said Edwards. For comparison, the average PPP loan approved from early 2021 to May 31 was $ 42,000, and according to the Small and Medium Business Administration, among the beneficiaries who insured the race, black borrowers were approved. I received 5.8% of the money I received.

“The work we do provides affordable capital,” says Edwards.

New Jersey-based TD Bank invested $ 30 million in CDFI as part of an equity fund announced in June, said Michael Innis, senior vice president and head of community lending and development at the TD Bank. Thompson said.

“They are experts in this field and they have a strong presence in the community,” says Innis-Thompson of CDFI.

Business owners often connect with CDFI through educational programs, ranging from webinars and networking events to months of business development classes. ACE offers programming in English and Spanish.

CDFI is “more than just capital,” says Innis-Thompson. They “provide technical assistance, other supports such as accounting, law, human resources, general advice and ways to create stronger business plans. We have a support system to ensure the success of these businesses. That is to say. “

You can use to find a CDFI that can help you CDFI locator A tool from Opportunity Finance Network, the national association of CDFI.

Like the CDFI, Minority depository institution – Banks most of whose shareholders or board members are of color – see new investments from banks and national companies. Wells Fargo, for example, has invested $ 50 million in equity in 13 black-owned banks.

MDI typically has similar underwriting requirements as state and local banks, but many are community-based and may go “harder” to work with small borrowers, Washington. Ken Alozie, managing director of DC-based commercial lender Greenwood Capital, said. To advise.

“Their mission is more to recharge their batteries or do something that will have an economic impact on the community in which they find themselves,” explains Alozie.

In addition, by working with local or community banks, you can circulate the dollar within your community, which can also benefit your neighbors.

In addition to CDFI support, TD Bank has committed $ 75 million to an SME investment firm, an SBA licensing body that provides equity and debt financing to growing businesses.

Financing a small business investment firm is similar to venture capital, but it is not suitable for all types of businesses. According to Innis Thompson, these investors typically look for well-established, ready-to-grow, mid-size companies with revenues of around $ 5 million or more. A list of active SBICs is available at if you think your business is suitable for this type of funding. SBA.gov..

JPMorgan Chase is also focusing on mid-sized companies looking to grow and has committed to investing $ 200 million with Project Black from private asset manager Ariel Alternatives.

In addition, PayPal has pledged $ 100 million to venture capital funds led by Black and Latinx.

Join the ecosystem to connect with investors. Network with the community, attend pitch events, and sign up for acceleration programs. However, keep in mind that only a small number of companies receive venture capital.

Promotion of financial equity

These commitments are part of a larger perspective of a company’s commitment to supporting racial equality. Banks and businesses are also promised to take out mortgages from borrowers of color, invest in historic black colleges, and help build affordable housing.

“There is a thirst to tackle racial justice on many fronts,” said Lisa Mensah, President and CEO of Opportunity Finance Network. “I think there is something in CDFI that we can offer right away.”

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This article was provided to The Associated Press by the Nerd Wallet personal finance website. Rosalie Murphy is a writer for Nerd Wallet. E-mail: [email protected]..

NerdWallet: How CDFI helps SMEs https://bit.ly/nerdwallet-cdfi-loans

Opportunity Finance Network: CDFI Locator https://ofn.org/cdfi-locator

NerdWallet: Three Ways Minority-Owned Banks Can Make a Difference in the United States https://bit.ly/nerdwallet-minority-owned-banks

Investment capital (SBA.gov): https://www.sba.gov/funding-programs/investment-capital

Copyright 2021 AP communication. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

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