How We Help Black Business Enterprises Access Capital To Grow and Thrive - Exponent Philanthropy
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How We Help Black Business Enterprises Access Capital To Grow and Thrive

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Having a thriving economy throughout New Jersey is essential to our mission of helping working families achieve financial stability, healthy relationships and hope. Access to jobs that pay a steady, living wage is part of the system we want to help bring about. Nurturing businesses and entrepreneurs in equitable ways is something we embrace—and it’s an arena where private foundations can play a powerful role.

Several years ago, Pascale Sykes Foundation established Thrive South Jersey, a fund managed by New Jersey Community Capital (NJCC), a Community Development Financial Institution (CDFI). The purpose was to provide loans to a rural area with dying cities, brain and entrepreneurial drains, and longtime businesses moving out of the area. The CDFI provided individual guidance, flexibility in its approach to borrower requirements, and nonconventional loans.

On March 13, 2020, New Jersey Governor Phil Murphy ordered “sequester” regulations, mandating that only a few essential businesses could remain open. It was obvious that all businesses, open or closed, were suffering. Our foundation reached out to NJCC to suggest a COVID-related fund to provide loans at no interest to entrepreneurs we had previously funded. In our view, we could not lend them funds and then see them fail due to the pandemic. We also offered loans to profit and nonprofit organizations at 2%.

We called an emergency Zoom meeting of trustees who wholeheartedly approved the million-dollar donation.

The power of partners

NJCC leveraged our funds to several million dollars with donations from large foundations and loans from banks. Bank loans were at 2%, so NJCC would have to charge 3% to make ends meet. Our funds not only seeded the program, but also covered the spread, keeping lending rates at 2% or 0% for those qualifying.

In November 2020, a Call to Action by the Association of Black Foundation Executives (ABFE) spurred us to address challenges faced by Black-owned businesses in obtaining needed capital. It was an opportunity to address inequities in New Jersey’s financial system, and strengthen communities.

In our business development work over the years, we noticed that small household businesses that were ready-to-expand lacked basic business knowledge and had difficulties meeting loan requirements. We also kept hearing that small Black-owned businesses had difficulty qualifying for Thrive South Jersey loans. We knew that financial training and coaching was needed to help small businesses obtain financing, but few organizations provided it. To fill the gap, we contacted NJCC, and they referred us to the African American Chamber of Commerce of New Jersey (AACCNJ or the “Chamber”), a statewide membership organization.

Establishing a Black business loan fund

We worked with the two agencies to develop an agreement to establish a Black business loan fund, backed by a $1 million grant from our foundation. NJCC would offer loans from $10,000 to $75,000 to businesses with one to 10 employees. NJCC would screen applicants and, if necessary, refer them to AACCNJ for classes and individualized coaching to prepare them to successfully apply for and repay loans. The program would be available to all Black business entrepreneurs, not just Chamber members.

We have started with a soft opening—the Chamber is coaching four Black-owned businesses located in New Jersey. The official opening is April 1, 2021; 20 businesses are on a waiting list. They will begin Chamber-led individualized coaching on or before that date.

And again, NJCC leveraged our foundation’s funds with donations from larger national foundations located in New Jersey.

A long-range goal that emerged is to establish AACCNJ as a Community Development Financial Institution. We floated the idea and the two agencies jumped at the chance. NJCC has brought AACCNJ onto its board and committees, and will help the organization develop its banking acumen. Over the next months, AACCNJ will transform itself from a membership organization into a financial organization creatively serving grassroots small businesses.

This is still a work in progress and developing rapidly. While the project has required additional work by Pascale Sykes Foundation staff, it has shown what a small foundation can do. We can move fast, get involved with grantees, and create a novel effort that builds small business, advances equity, and attracts the attention and support of big foundations.

Along the way, we follow a mindset that has paid off for us: when we encounter roadblocks, we reach out to partners to find ways to overcome them. This approach sometimes leads us into new kinds of work. But we’re willing to go there, if it’s what is needed.

Frances P. Sykes began her career as an educator teaching in elementary and middle schools throughout the Northeast U.S. As President of the Pascale Sykes Foundation, Fran developed the foundation’s mission of promoting the independence, integrity and well-being of working low-income families and led the evolution of this work into the Whole Family Approach. After listening and learning from multiple community voices, the foundation evolved the initiative to support social service collaborations and collaborations in transportation and economic development. Mrs. Sykes was married to Donald (Skip) Sykes for over 50 years and has three grown children and seven grandchildren.

About CDFIs: Community development financial institutions offer financing, technical assistance, and business training to organizations with social or environmental missions. They finance affordable housing, child care, health care, environmental preservation, schools, health clinics, arts venues and small startup businesses—often in neighborhoods and communities underserved by traditional lenders. CDFIs include banks, credit unions, loan funds and venture funds; many are federally insured. Making a grant or loan to a CDFI is almost as straightforward as opening a bank account. Small foundations’ CDFI loans, made at below-market or 0% interest, often complement their grantmaking goals, advance their mission investing, or accomplish both.

To find CDFIs serving your community, visit these websites and call upon other Exponent Philanthropy members via our Discussion Community.

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