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How to Benefit from Your Company’s Pledge to Minority Companies | Lifestyle

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

However, not all of these amounts go directly into the employer’s pocket.Many are invested in other financial institutions — especially Community development financial institution, Its services include providing small business loans to underserved borrowers 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, support for businesses and philanthropy “can accelerate the work we do,” including increasing lending.

If you are a color business owner, here’s how these pledges can benefit you.

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

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 may decline. That is, a low interest rate retail loan to a borrower with a short credit history or limited collateral.

For example, ACE’s average paycheck protection program loan is about $ 24,000, with 90% of the money going to businesses with five or less employees and 67% to black-owned businesses, Edwards said. 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 recipients who provided the race, black borrowers were approved. I received 5.8% of the money I received.

“The work we do makes it possible to provide affordable capital,” says Edwards.

New Jersey-based TD Bank has invested $ 30 million in CDFI as part of a stock fund announced in June, said Michael Innis, Senior Vice President and Community Lending and Development Officer at TD Bank. Thompson says.

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

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

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

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

Like CDFI, Minority deposit institution — Banks of which most shareholders or board members are of color — are seeing new investments from national banks and businesses. Wells Fargo, for example, has invested $ 50 million in equity capital in 13 black-owned banks.

MDI generally has similar underwriting requirements as national and local banks, but many are community-oriented and may make “more efforts” to work with smaller borrowers, Washington. Ken Alozie, Managing Director of DC-based commercial lender Greenwood Capital, says. Advisor.

“They have more of a mission to rejuvenate or do something that will have an economic impact on the community in which they are located,” says Alozie.

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

In addition to CDFI support, TD Bank has dedicated $ 75 million to a specialized SME investment company, an SBA licensing organization that provides equity and debt finance to growing companies.

Financing from a small business investment company is similar to venture capital, but it is not suitable for all types of businesses. According to Innis Thompson, these investors are usually looking for medium-sized, well-established businesses that are ready to grow, with revenues of around $ 5 million or more.A list of active SBICs is available at if you believe your business is suitable for this type of financing SBA.gov..

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

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

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

Promotion of financial equity

These pledges are part of a larger outlook for a company’s commitment to support racial equality. Banks and businesses are also promised to take out mortgages to colored borrowers, invest in historic black colleges, and help build affordable homes.

“There is a thirst for tackling racial justice on many fronts,” said Lisa Mensah, President and CEO of the 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 personal finance website Nerd Wallet. Rosalie Murphy is a writer for Nerd Wallet. Email: rmurphy@nerdwallet.com..

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.

How to Benefit from Your Company’s Pledge to Minority Companies | Lifestyle

Source link How to Benefit from Your Company’s Pledge to Minority Companies | Lifestyle

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