New Small Business Loan Fund puts Racial Equity Front and Center

Three-year fellowship results in a loan fund seeking to address racial disparities in the city with some of the worst economic inequality in Michigan.

Grand Rapids has been found to have the highest wealth inequality in Michigan. (Photo by DebMomOf3 CC BY-ND 2.0)

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Grand Rapids, Mich., was once ranked as one of the top 50 creative class cities in the U.S. — but that hasn’t solved its racial disparities. A recent study placed Grand Rapids ahead of only Milwaukee on a list of 52 cities where African-Americans are struggling economically.

Richard Flowers wants to do something about that by starting and growing his own business. He launched Reliable Medical Transport in 2015. Family members in the Chicago area ran a similar business, so he brought the model of door-to-door, wheelchair accessible transportation services to the Grand Rapids area.

“I got tired of making other people money, and wanted to do something for myself,” Flowers says.

But, after a divorce and losing a job, Flowers didn’t have good credit. All he had was vision:

“I just took a lined piece of paper, made it into a tri-fold piece of paper, and I wrote out what I wanted this company to be like,” Flowers says. “I took that paper to a couple of friends of mine and let them see what I was looking at doing, and all three of them said ‘Hey, we want in on that.’”

Knowing he had bad credit, Flowers didn’t approach traditional banks for a loan. It affected his business’ growth. “I had to pause and stop so many times because I didn’t have the capital that I needed to get the new vehicles that I needed,” he explained. Still, Flowers focused on building a “track record” he could take to potential lenders to demonstrate the business’ viability.

Flowers is hardly alone in feeling like banks weren’t an option for him. As part of the inaugural 2014 cohort of the W.K. Kellogg Foundation Community Leadership Network — a three-year fellowship — Eric Foster spent the last few years studying race-related perceptions and barriers around small business lending, with a concentration on his hometown of Grand Rapids. Forty-two percent of entrepreneurs in two focus groups, he says, told him that they felt they would be denied loans because of race. “I exemplified that belief six years ago as well,” says Foster.

It’s an example of internalized oppression, according to Foster. Facts back up such beliefs and perceptions. According to the Small Business Administration’s own data, in Fiscal Year 2018, African-American borrowers received only 3.1 percent of loans from the 7(a) small business loan guarantee program — the federal agency’s main program for encouraging small business loans to borrowers considered too risky for conventional small business loans.

Foster found that entrepreneurs of color would turn to predatory lending services, such as payday lenders, in order to get capital to finance their business ventures.

Working with Cuong Huynh, another inaugural W.K. Kellogg Community Leadership Network Fellow, Foster co-founded Rende Progress Capital with the intention of making small business loans to help address the racial disparity in economic outcomes in places like Grand Rapids. Flowers is Rende Progress Capital’s first borrower — he’s getting a $250,000 to grow the company. (Flowers connected with Render Progress Capital through Northern Initiatives, a federally-certified community development financial institution based in Michigan, which is also providing some capital to Reliable Medical Transport.)

“It also allows me to give other people the opportunity to take care of their families by working with Reliable Medical Transport,” Flowers says.

He’ll use part of the money to develop second business — a transportation company focused on shipping small numbers of packages, which Flowers is calling R3 Logistics.

“With Reliable Medical Transport, we transport clients back and forth between doctor’s appointments, therapy, you name it. We give people a better quality of life,” Flowers says. “[But] when people cancel, I don’t get paid.”

Flowers anticipates the shipping business will help smooth out income during any slow periods due to cancellations, or potentially from budget cuts — Reliable Medical Transport sub-contracts with the state of Michigan to provide its transportation services for elderly and disabled people.

Render Progress Capital’s website says it makes its loans with racial equity in mind, combining traditional loan evaluation criteria with “character criteria” in order to reach lending decisions. Foster declined to offer specifics about the evaluation criteria, but explains that the process assesses the racial equity practices in the business plan and that their loan committee utilizes the Racial Equity Impact Assessment developed by Race Forward as part of making a loan decision.

Part of the loan fund’s early start-up capital comes from the Grand Rapids Community Foundation, which provided a $100,000 grant as well as a $200,000 low-interest loan to help get the fund going. While currently focused on Michigan, Rende Progress Capital plans on expanding its operations to the District of Columbia and Virginia.

Flowers says his loan has already helped the business turn a corner. “Those guys gave to us to be able to create opportunities and to grow,” he says. “When you don’t have any capital, you can have a lot of ideas, but if you don’t have any money behind it, it’s hard to get things launched.”

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Zoe Sullivan is a multimedia journalist and visual artist with experience on the U.S. Gulf Coast, Argentina, Brazil, and Kenya. Her radio work has appeared on outlets such as BBC, Marketplace, Radio France International, Free Speech Radio News and DW. Her writing has appeared on outlets such as The Guardian, Al Jazeera America and The Crisis.

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Tags: small businesscdfi fundmichigan

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