Tucson Small Business to Have Access to $500,000 in Revenue-Based Financing Through Innovative Nonprofit Partnership
Community Investment Corporation partners with Startup Tucson, Common Future / Community Credit Lab to bring $250,000 in investments to STAC Initiative to support small businesses in Tucson.
January 30, 2023 (Tucson, Arizona) – Local small businesses and business owners that are unable to access traditional commercial loans are getting some help from two local nonprofit organizations. Tucson-based Community Investment Corporation (CIC) and Startup Tucson, are partnering with a national leader in innovative community-based economic development work, Common Future, and their in-house investment entity, Community Credit Lab, to launch a new business financing initiative, Success Through Alternative Capital (STAC), which aims to help businesses without adequate collateral or assets to qualify from traditional loans.
Common Future is investing $250,000 in the pilot program which CIC is matching with $250,000 of its own funds. Startup Tucson, for its part of the partnership, is providing business and entrepreneurial education to support local business owners who access STAC funding. Eric Horvath, Director of Capital Strategies for Common Future explained his organization’s reason for investing in Tucson. “We wouldn’t be here if it wasn’t for the trust and belief that we have in CIC and Startup Tucson,” he said. “What really stood out was the dogged determination to innovate and do something different from both organizations and to maximize how much community impact we can have.”
STAC is designed as revenue-based financing (RBF) allowing small businesses to pledge future revenues for an advance of financial capital. Payments can vary depending on how well a business does and its gross revenues after receiving funding. Businesses have higher payments when they are generating more revenues and lower payments when they are generating less revenues, an arrangement that can be especially useful for seasonal businesses.
The revenue-based approach is being facilitated by CIC’s technology partner, Ned, which will help the lender build capacity and make loan decisions in days rather than weeks. Ned’s end-to-end revenue-based financing platform will enable CIC to streamline applications, qualification and disbursement activities, and then automate revenue-based repayments on the backend.
“Ned has been a fantastic partner for us,” said Danny Knee, Community Investment Corporation’s Executive Director. “Their platform provides efficiencies that allow us to spend our time helping businesses rather than evaluating them.”
STAC is expected to fund 25 local businesses over the next year that the program partners say will be used to purchase essential equipment, purchase inventory, and to meet the cash flow demands of running a business.
“Our economy works well for people with existing wealth,” said Knee, “But the over-reliance on asset-based lending without complementary alternatives makes it nearly impossible for many small businesses, and especially those run by entrepreneurs of color, to get the financial capital they need to grow and succeed.”
Asset-based underwriting is the practice of securing loans with the pledge of turning over a company or personal assets to a lender if a business owner is unable to repay a loan. Entrepreneurs of color have a harder time accessing traditional capital in the U.S. than their white counterparts due to persistent wealth gaps and owning fewer personal and business assets. “We are trying to find ways to make our economy more inclusive,” said Liz Pocock, CEO of Startup Tucson. “We believe revenue-based financing is a way to support emerging entrepreneurs, including entrepreneurs of color.”
Interested businesses should contact Community Investment Corporation through their website:
https://cictucson.org/stac/.
