This loan fund is the brainchild of Community Investment Corporation (CIC) staff who wanted to take action in the wake of recent and ongoing national tragedies and calls for racial equity and justice. In partnership and with the support of BLAX Friday and Startup Tucson, CIC will shift decision-making to the community itself about where (geographically), to whom (communities of color underserved by financial institutions and systems), and under what circumstances (measures of risk) capital flows.
Traditional economic structures and capital access mechanisms have deprived too many BIPOC individuals, families, and entrepreneurs of essential financial empowerment tools for too long. We are proposing a new approach and solution to promote holistic societal and economic equity and health.
Purpose: To offer 0% interest loan funding to early stage BIPOC identifying entrepreneurs in the first 5 years of formalized business ownership. This funding will come from an established “revolving loan fund” housed and managed by CIC. Revolving loan funds are self-replenishing pools of money, typically utilizing interest and principal payments from existing loans to issue new ones. Because the initial loans from this fund will be originated at zero interest, the fund in its nascency will rely on financial and in-kind support from CIC. Funding for the inaugural BIPOC loan has been generated by CIC with all current staff making personal contributions. CIC is also actively fundraising to grow the pool of available funds with an initial goal of raising $100,000 for distribution in 2021. All repayment of loans will be reinvested in the fund – these funds may be loaned out with nominal interest in the future to help offset administrative costs of managing the fund.
Process: The BIPOC Community Managed Loan Fund will redefine traditional lending qualifications and decision making. CIC staff will act as educator, facilitator and guide, and will originate and service all loans and manage all monies in relation to this fund. Decision making will however be done solely by the BIPOC CMLF members. The committee will establish and define underwriting criteria, loan application details and the process for approval, as well as make the final decisions on loan approvals. The committee will meet monthly.
Fundamentals of loan (subject to change based on committee):
- Up to $10,000
- 3 to 5-year term
- 0% interest
- No traditional collateral needs to be pledged
- Entrepreneur within first 5 years of formalized business ownership
Estimated timeline and next steps: