A $100,000 investment has been made to support at least 10 Southern Arizona small business entrepreneurs who are Black, Indigenous or people of color.
The no-interest microloans of up to $10,000 are awarded under a character-based lending model, in which a borrower’s personal qualities, community reputation and other factors that go beyond credit scores and collateral are given greater emphasis, a news release said.
The loan fund is two years old, and its volunteer committee of community leaders has the decision-making authority for the loan funding, defining the application process and the criteria used.
Obstacles to capital access for communities of color include distrust of traditional financial institutions, overly complicated application processes, and banking’s over-reliance on collateral and credit scores to make loan approval determinations, the committee found.
Instead, a low-barrier application allows business owners to apply via video, audio or in writing. Only after being approved for a loan are entrepreneurs required to provide financial and business documentation, the news release said.
Over the past two years, the committee has approved more than 50 no-interest microloans in Southern Arizona, totaling nearly $400,000 in funding.
“I think some traditional lenders might be skeptical of our underwriting process,” said CIC Executive Director Danny Knee, “but the performance of our loan portfolio shows that we are on to something with our trust-based approach.”
Growth Partners Arizona, a Community Development Financial Institution, is planning to expand the fund’s community-managed approach statewide, the news release said.
“Investing in the fund is not only important to the community but resonates with me personally,” said Growth Partners Arizona CEO Andre Whittington. “I have witnessed family members and friends lose their businesses due to limited or nonexistent funding opportunities. Through this partnership we are providing real solutions and establishing inclusive financial pathways for BIPOC business owners to secure the capital needed to scale their businesses.”
For more information about the BIPOC Community Managed Loan Fund, visit tucne.ws/1kzm.
Read the original article on Tucson.com.