Project Category: Investing in Small Business
Organization Name: Urban League of Greater Cleveland and City of Cleveland
Organization Website: http://www.rethinkcleveland.org
601 Lakeside Avenue, Room 210
Cleveland, Ohio 44114
Project Cost: $8,000,000
In light of the lingering effect left by the Great Recession on minority small businesses, the City of Cleveland supported an interactive in partnership with Urban League of Greater Cleveland, the National Urban League’s Urban Empowerment Fund and National Development Council to create the Capital Access Fund of Cleveland (CAFGC) which has a simple long term goal: to sustain existing and create additional viable minority small businesses that create jobs for community residents and build community wealth.
To achieve this goal, the partnership created a set of flexible financing tools and support that will benefit minority small businesses in Cleveland. The CAFGC is an $8 million dollar loan fund comprised of two different funding sources. $6 million was capitalized by the Grow America Fund. The remaining amount was capitalized by a $2 million dollar credit facility from Morgan Stanley that is secured by a 20% loan loss reserve. The $2,000,000 capital pool from Morgan Stanley is a critical tool to accomplish this goal as it has allowed an alternative source of capital that can be used to meet minority small business needs with loans up to $150,000 at attractive rates and terms.
The $2 million dollar credit facility is secured by the following organizations:
- National Urban League’s Urban Empowerment Fund: $100,000
- National Development Council: $100,000
- Morgan Stanly NMTC Equity Investment
- City of Cleveland: $50K
- Cuyahoga County: $50K
The program will also provide technical assistance in the form of pre and post loan counseling for minority business owners working with them to overcome traditional financial barriers to accessing credit by improving the business’ debt readiness, refining plans for growth and new investment and improving business sustainability and entrepreneur know how.
Current Status: Fund has bee capitalized and providing loans to businesses.
Community Needs Addressed:
All businesses, including minority firms, are vital to the growth and success of our economy. This initiative acknowledges the historic and current contribution they have in all sector of business. The CAF seeks to assist minority firms gain access to help and capital they need to be able to compete and grow.
- Needs addressed
- Access to capital.
- Terms are flexible and low costs compared to comparable loans with traditional lenders.
- Technical assistance through pre and post loan counseling.
- Fosters entrepreneurship and business expansion.
- Job retention and creation.
- Family and neighborhood wealth creation.
Benefits and outcome:
Unbiased patient assistance and capital is the primary benefit of the program.
- Unbiased-The historic effects of lending discrimination from financial institutions have left many minority-owned companies apprehensive about applying for credit at large and medium-sized banks. Believing that banks “will not lend to me” many have fell prey to predatory lending schemes and missed business opportunities due to lack of capital. The CAF seeking to address this by fostering an environment where potential borrowers are welcome, can ask questions, get honest and constructive feedback regarding their application and the lending process.
- Patient Capital-Leveraging UL’s technical assistance services, clients of the CAF program will have access to pre and post loan counseling to help, if needed, get them ready for the loan underwriting process. The program will work with applicants to structure loans that will meet the borrower’s needs at terms that will guarantee repayment and success of the project.
Although in its early stages, the program seeks to provide 50 loans totaling $8 million dollars with the goal of creating and retaining a least 300 jobs. To date, the loan fund has made 13 loans totaling $1.9 million since its inception of December 1, 2016. This high traction helps to confirm the anticipated demand for this program in the greater Cleveland area.
Project partners and collaborators:
CAF Partners are organization and institutions recognized the opportunity to leverage their national and local expertise to create local impact in the Greater Cleveland region by addressing the lack of access to capital for African American and other minority-owned businesses.
- Urban League of Greater Cleveland, National Urban League -The ULGC and NUL seeks to empower communities and change live through their network of chapter organizations throughout the nation. Nationally, thought their Empowerment Fund, NUL provided a grant that helped to secure the $2 million dollar credit facility provided by Morgan Stanly. Locally, the ULGC is the CAF technical assistance. Their role is to assist minority business through the CAF process providing pre and post loan closing counseling and market the program to the larger community.
- City of Cleveland Department of Economic Development. As the economic development arm of Mayor Jackson’s administration, its mission to increase the standard of living for all citizens through its various programs and services. The City of Cleveland supported this initiative by providing a grant that helped secured the $2 million dollar credit facility provided by Morgan Stanly.
- Cuyahoga County provided a grant in the amount to help secure the $2 million dollar credit facility provided by Morgan Stanly.
- Morgan Stanley-Initial $2 million capital infusion to the Community Impact Loan Fund and operating support.
- National Development Council-With over 50 years of economic and community development experience, NDC partners with municipalities, nonprofit organizations and the private sector to create innovative ways to increase the flow of capital for investment to low-income communities. NDC provide technical assistance support, financial capital and expertise when implementing this initiative.
What makes your project unique?
Addressing the issue head on is what makes this project unique. The major shortfall for many programs seeking to address historic and systematic wrongs committed to minority communities in general and African American in particular, are they only address one side of the coin if any at all. For example, some take the position that if only minority businesses are better educated and prepared they will position themselves for bank financing and opportunities but do not acknowledge the historic denial of capital even for firms that are prepared. The Capital Access Fund address both of these concerns in a comprehensive approach helping minority businesses building relationship with a lender that has their best interest at heart. Not only are readiness issues address but access to capital as well.
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