Program will lend $6.5M to Detroit minority businesses

Minority-owned small businesses in Detroit have a potential new source of business capital, thanks to a $6.5-million lending program being announced today.

Three organizations — the Detroit Development Fund, JPMorgan Chase and the W.K. Kellogg Foundation — are announcing the creation of the fund for Detroit businesses owned by entrepreneurs of color and businesses that primarily hire people of color.

The Entrepreneurs of Color Fund is aimed at boosting economic opportunity for minority-owned businesses in Detroit by providing them with greater access to capital and business assistance. Loan sizes will vary, but the average loan will range from $50,000 to $150,000. Businesses that receive financing will be able to use the capital to expand, finance equipment, address short-term cash-flow needs and provide contractor lines of credit.

The fund will also provide loan recipients with technical assistance, such as networking, marketing, business plan development and cash-flow management.

Eligible businesses must be majority owned by people of color or have more than half their workforce made up of people of color. Businesses can learn more about eligibility by contacting the Detroit Development Fund at 313-784-9547 or vholsey@detroitdevelopmentfund.com.

“For Detroit's comeback to be a true success, there must be opportunity for the Detroiters who have stayed,” said Detroit Mayor Mike Duggan. “This new program fits perfectly with the work my administration is doing with Ken Harris and the Michigan Black Chamber of Commerce to make sure Detroit residents who want to start a business in their city have access to the capital and support they need to be successful.”

Administered by the Detroit Development Fund, the new pot of money will seek to provide financing for general contractors, small retailers and other neighborhood service businesses along with many other types of businesses. The fund will help businesses that traditionally have lower credit quality, lack access to capital and staffing and primarily serve Detroit’s neighborhoods.

Backers of the program say Detroit ranks among the largest U.S. cities for the number of minority-owned businesses, with more than 30,000 such firms here. Yet, despite their importance to the economy, recent research by Michael S. Barr, professor of law at the University of Michigan, says minority-owned businesses rely significantly more on investments of personal or family wealth than on outside debt or equity.

“Minority-owned businesses, including those in Detroit, often lack access to credit, to essential skills needed to survive and grow, and to business networks for mentoring and new business opportunities,” Barr said. “Increasing business formation by minority and female entrepreneurs is critical to improving the rate of entrepreneurship for the country as a whole, and generating new growth and jobs.”

Said Ray Waters, president of the Detroit Development Fund: “The Entrepreneurs of Color Fund is very exciting for us and the Detroit small businesses it will support." He added, “The unique structure of the F fund allows DDF to provide a variety of lines of credit and loans to accommodate the needs of entrepreneurs of color."

The fund is being created through a $3.5-million grant provided by the JPMorgan Chase Foundation, as part of Chase’s $100-million commitment to Detroit’s economic recovery, and $3 million in program-related investments from the Kellogg Foundation.

During implementation of this initiative, DDF will also work with Max M. & Marjorie S. Fisher Foundation’s Detroit entrepreneurship programming efforts.

“Neighborhood businesses are critical to Detroit's comeback, but many need access to the right capital to grow and thrive,” said Janis Bowdler, head of Community Development for Global Philanthropy at JPMorgan Chase. “The Entrepreneurs of Color Fund is a unique approach that combines flexible financing and services to strengthen continued business growth in Detroit’s neighborhoods.”

“The Kellogg Foundation is not new to the idea of creating access to capital for people of color,” said La June Montgomery Tabron, the Kellogg Foundation's president and CEO. “We know that investment in people of color is essential for equitable and effective urban development and this nation's sustained economic dominance.”

U.S. Sen. Debbie Stabenow, a Democrat from Lansing, said, "Detroit’s strength has always come from entrepreneurs who have a great idea and can build that into a business that thrives and creates jobs." She added that “this new public-private partnership will help business owners succeed and grow, creating jobs and opportunity across the region.”

Contact John Gallagher: 313-222-5173, gallagher@freepress.com or on Twitter @jgallagherfreep