JPMorgan Chase, Detroit Development Fund and the W.K. Kellogg Foundation Announce $6.5 Million Loan Fund for Detroit’s Minority-Owned Small Businesses
Entrepreneurs of Color Fund will provide greater economic opportunity for small businesses that lack access to credit and primarily serve Detroit’s neighborhoods
Detroit, September 15, 2015 – The Detroit Development Fund (DDF), JPMorgan Chase & Co. and the W.K. Kellogg Foundation (WKKF) today announced a new $6.5 million lending program for Detroit businesses owned by entrepreneurs of color and businesses that primarily hire people of color. The Entrepreneurs of Color Fund will boost economic opportunity for minority-owned businesses in Detroit by providing them with greater access to capital and business assistance, allowing them to grow, hire local and further contribute to the city’s recovery.
Facilitated by DDF, a Michigan 501(c)3 Community Development Financial Institution (CDFI), the 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.
Small businesses have historically been at the heart of economic growth in Detroit, and they have the potential to reduce unemployment and expand opportunity for Detroiters. 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. “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."
“The Entrepreneurs of Color Fund is very exciting for us and the Detroit small businesses it will support,” said Ray Waters, President, DDF. “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.”
Through a $3.5 million grant provided by the JPMorgan Chase Foundation, as part of its $100 million commitment to the 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.
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. Eligible small businesses must be majority owned by people of color or have more than half their workforce made up of people of color. During implementation of this initiative, DDF will also work with Max M. & Marjorie S. Fisher Foundation’s Detroit entrepreneurship programming efforts.
“Neighborhood businesses are critical to Detroit's comeback, but many need access to the right capital to grow and thrive," Janis Bowdler, Head of Global Philanthropy, JPMorgan Chase. “The Entrepreneurs of Color Fund is a unique approach that combines flexible financing and services to strengthen continued business growth in Detroit’s neighborhoods.”
“The Kellogg Foundation is not new to the idea of creating access to capital for people of color,” said La June Montgomery Tabron, WKKF’s President and CEO. “We know that investment in people of color is essential for equitable and effective urban development and this nation's sustained economic dominance. We are proud partners with Detroit Development Fund, JPMorgan Chase and others who will join us to improve the economic opportunities for entrepreneurs, who are also parents, to better support their families and ensure success for Detroit’s kids.”
Funding will allow the Entrepreneurs of Color Fund to provide loans and technical assistance and establish a loan loss reserve. The reserve will allow DDF to expand its lending criteria and help Detroit small businesses that traditionally did not qualify for a loan.
“Detroit’s strength has always come from entrepreneurs who have a great idea and can build that into a business that thrives and creates jobs,” said U.S. Senator Debbie Stabenow. “This new public-private partnership will help business owners succeed and grow, creating jobs and opportunity across the region.”
Michael Barr’s recent research, Minority and Women Entrepreneurs: Building Capital, Network, and Skills, published by the Hamilton Project of the Brookings Institution, calls for greater support for minority-owned and female-owned small businesses.
“Minority-owned businesses, including those in Detroit, often lack access to credit, to essential skills needed to survive and grow, and to business networks for mentoring and new business opportunities,” said Michael S. Barr, Professor of Law at the University of Michigan. “Increasing business formation by minority and female entrepreneurs is critical to improving the rate of entrepreneurship for the country as a whole, and generating new growth and jobs.”
Interested Detroit small businesses can learn more about eligibility by contacting the Detroit Development Fund at 1-313-784-9547 or firstname.lastname@example.org.
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