$10,000 interest-free loans available for Tucson BIPOC biz owners

Bennito L. Kelty

TucsonSentinel.com

The local nonprofit Community Investment Corporation is accepting applications for a second year of microloans for minority-owned small businesses in southern Arizona. Eligible businesses must be owned, at least in part, by anyone who identifies as Black, Indigenous, or a person of color for BIPOC loans.

In 2021, 15 young business owners received up to $10,000 in interest-free loans of the $100,000 that was available under the CIC program in its inaugural year. This year, the funding available for this year’s loans has tripled to $300,000.

To benefit from the loan:

  • At least 50% of business owners must identify as BIPOC
  • Must-Have Business in Southern Arizona
  • Businesses can be at any stage of development, including startups

Applications are free, but CIC will no longer offer a $100 grant to any business owner who completes the application as it did last year. Businesses can apply for a minimum loan of $500, which few do as most grants are for $5,000 or $10,000.

The story that entrepreneurs tell in their entry will be the “main factor” in choosing the winners, said CIC chief executive Danny Knee.

Three to four loans will be issued per month, which is a change from last year, when all loans were issued at the same time. The CIC expects to award 36 to 40 awards within a year with the new format.

Applications will be reviewed once a month and the first group of winners will be announced around August 5th. The new format eliminates strict deadlines as new application windows will open at the start of each month.

BIPOC committee takes ‘100% of the decision-making’

The winners will be selected by a committee of members of the BIPOC community outside the banking and financial sector. The selection committee “will have 100% of the decision making” for the loans, including credit eligibility and the amount awarded to each winner, Knee said.

The CIC is reaching out to non-banking or financial communities for the committee to develop an “innovative application and approval process,” Knee said. Banking professionals are “sometimes part of the problem” of racial inequality, Knee said, but BIPOC’s selection committee chooses its own solvency standards to circumvent that.

“(Traditional underwriting) just doesn’t meet the needs of everyone who needs financing,” Knee said. “BIPOC entrepreneurs, in general, are being denied credit more often, they’re being charged higher credit rates to get a loan, and so there are some really problematic outcomes.”

Applying is “really easy,” Knee said, but “it’s a bit more work after you hear ‘yes’.” Applicants may have to fulfill additional requirements that the committee recommends as a loan condition.

The selection committee may recommend that candidates learn some skills before receiving the loan. Startup Tucson and YWCA Southern Arizona, both CIC partners in the program, will provide candidates with training in business basics, marketing, profit and loss reporting and the use of balance sheets, among other courses. The program also offers to connect entrepreneurs with mentors or subject matter experts.

The format is supposed to “respect people’s time” and let applicants know whether they’re approved or rejected before spending too much time gathering paperwork and completing the application, Knee said.

“In a typical loan process, there’s a lot of document collection, all of those things. It may look a bit like a black box. People don’t know what makes them qualified,” he said. “They put all these things together and can hear ‘no’. I don’t think that respects people’s time enough.

CIC announced 16 BIPOC loan winners last year, but only 15 ended up receiving the money because one dropped out during a financial analysis after being approved. The entrepreneur “decided he wasn’t ready for the loan yet” after being approved, Knee said.

“We think it’s a win,” Knee said of the candidate’s loss last year. “They had the agency to decide that was absolutely fair and they weren’t ready for that yet.”

CIC approved loans of $102,000 last year, but only granted $94,000 after the contractor gave up.

“Calls for racial equity and justice”

Last year’s selection committee included members from local businesses, agencies and organizations such as Tucson Electric Power, the Pima County District Attorney’s Office, Casino del Sol and Blax Friday. The CIC is not represented on the committee.

CIC staff “simply provide the resources, the money and the administrative power, who can use our expertise to provide and manage the loans,” Knee said. CIC staff volunteer their time to work with the program.

CIC’s mission is to generate cash investments for residents and small community projects in Pima County. They also played a central role in managing the eviction prevention fund set up by the county and the city of Tucson.

The BIPOC loan program started in 2021 but stemmed from “CIC staff wanting to do something actionable, wanting to do something tangible in the wake of the murder of George Floyd in the summer of 2020,” their former door said. -speak last year.

CIC sought to fund entrepreneurs of color to respond to “calls for racial equity and justice” beginning in 2020. Initial funding for the program came from $2,700 in donations from each CIC staff member.

When CIC started BIPOC loans, they reported that 85% of American entrepreneurs started businesses with money from friends and family, but white families had five times the wealth of Hispanic families and 10 times the wealth of black families. The disparity in family wealth is even greater for Indigenous families than for Black families, according to the CIC.

Local businesses BLAX Friday and Startup Tucson worked with CIC to start BIPOC loans. Other companies such as Tucson Electric Power, United Way of Tucson, Women’s Foundation, Cox Communications, Tucson IDA, Pima IDA and PNC Bank donated to this year’s fund.

Everything repaid by business owners to the loan goes to next year’s BIPOC loans under a revolving fund. CIC tells loan winners they have to “pay it back to pay it back”.

The revolving fund is getting closer to the point where repayments alone can sustain the next year’s fund, instead of relying solely on donations. The success of the revolving fund model is what allowed CIC to begin offering the rewards monthly, Knee said.

The first round of BIPOC loans in 2021 went to entrepreneurs who were printers, designers, farmers, cleaners and media professionals, among others. Some of the activities included Fungirl’s Fungi, which sells gourmet mushrooms, and Barrio Books, a bookstore for BIPOC authors.

Bennito L. Kelty is the IDEA reporter for TucsonSentinel.com, focusing on stories of inclusion, diversity, equity, and access, and a Report for America body member supported by readers like you.

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