Small businesses that lack access to credit and primarily serve Detroit’s neighborhoods can now take advantage of a new loan program. JPMorgan Chase & Co. along with W.K. Kellogg Foundation has announced a new $6.5 million lending program for Detroit businesses owned by entrepreneurs of color, and businesses that primarily hire people of color.
There are approximately 32,000 minority-owned small businesses in Detroit, according to the U.S. Census. This ranks Detroit as the fourth largest U.S. city for the number of minority-owned businesses. Yet, despite their importance to the economy, recent research by Michael S. Barr, Professor of Law at the University of Michigan, says minority-owned businesses rely significantly more on investments of personal or family wealth than on outside debt or equity.
“For Detroit’s comeback to be a true success, there must be opportunity for the Detroiters who have stayed,” said Detroit Mayor Mike Duggan in a released statement. “This new program fits perfectly with what our administration is doing, through Motor City Match and other efforts, to make sure Detroit residents who want to start a business in their city have access to the capital and support they need to be successful.”
Through a $3.5 million grant provided by the JPMorgan Chase Foundation, as part of its $100 million commitment to Detroit’s economic recovery, and $3 million in program-related investments from the Kellogg Foundation, the Entrepreneurs of Color Fund will provide short and long-term loans. Loan sizes will vary, but the average loan will range from $50,000 to $150,000. The Kellogg Foundation developed and initiated the Fund because of its long-standing commitment to equity and to Detroit.
Facilitated by the Detroit Development Fund, a Michigan 501(c)3 Community Development Financial Institution, the Entrepreneurs of Color Fund will seek to provide financing for general contractors, small retailers and other neighborhood service businesses, along with many other types of businesses. The Fund will help businesses that traditionally have lower credit quality, lack access to capital and staffing and primarily serve Detroit’s neighborhoods.
“The Entrepreneurs of Color Fund is very exciting for us and the Detroit small businesses it will support,” added DDF President, Ray Waters. “The unique structure of the Fund allows DDF to provide a variety of lines of credit and loans to accommodate the needs of entrepreneurs of color. “We are pleased to facilitate the pilot program and are grateful for the support of JPMorgan Chase and the W.K. Kellogg Foundation. We look forward to growing our lending in minority communities.”
Businesses receiving financing will be able to use the capital to expand, finance equipment, address short-term cash flow needs, and provide contractor lines of credit. The Fund will also provide small business loan recipients with technical assistance, such as networking, marketing, business plan development, and cash flow management. According to the accouterments, eligible small businesses must be majority-owned by people of color, or have more than half their workforce made up of people of color.
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