Black Business Investment Corp. extends its loan services
The growth of Palm Beach County is creating a demand for capital from entrepreneurs and small business owners. But when a business does not follow the underwriting guidelines of the big banks, who can they turn to for help?
From November 15th the Black Business Investment Corp. will be a resource for a wide range of borrowers.
Formed in 1987 to provide direct lender loans to black-owned businesses, the BBIC has recently grown into a diverse lending source.
“We are Palm Beach County’s best kept secret,” said Marlon D. White, president of the Riviera Beach-based BBIC.
A new designation for BBIC makes it a community development financial institution, an entity that provides affordable loans to low-income borrowers. This means that the association is almost a bank, except that it does not take deposits.
Instead, the BBIC can partner with other lenders or make recommendations, dramatically increasing its lending capacity not only for business loans, but also for home loans.
The city of West Palm Beach recently provided $ 150,000 to the BBIC to make business micro-loans, which are loans ranging from $ 5,000 to $ 20,000, White said. These loans carry interest only for the first four months and a 48-month repayment schedule, generous terms that are usually not offered by commercial banks.
Meanwhile, Palm Beach County recently increased its contribution to the BBIC to $ 150,000 from $ 54,000, White added.
The loans are requested not only by black-owned businesses, but also by a range of business owners, which has led the BBIC to increase its reach by establishing a new subsidiary, Pathway Capital Funding.
Pathway will be able to lend to businesses that are not black owned or controlled.
About 60% of Pathway’s loans will go to women and minority-owned businesses operating in low to moderate income areas. The remaining 40% can be donated to any business, regardless of ownership or area of operation.
Bank of America has been a major funder of BBIC’s efforts to become a CDFI and create the Pathway subsidiary. The bank is the country’s largest private investor in CDFIs.
In Palm Beach County, Bank of America pledged $ 2 million in line of credit for loans to Pathway, plus an additional $ 75,000 to manage expenses, White said.
Fabiola Brumley, Palm Beach County president for Bank of America, said BBIC’s lending expansion “is a natural progression” for executives looking to expand lending.
“We didn’t have a direct CDFI lender in Palm Beach County before, and we’re very excited to have our own,” said Brumley.
Other lenders have also stepped up, including the JP Morgan Chase Foundation, which this month awarded a $ 300,000 grant to Pathway, White said.
The BBIC was founded 34 years ago by the late John Howard, a banker who created the entity after the 1985 passage of the Small and Minority Business Act which provided money to nonprofits.
Other state BBICs provided direct loans, but the Palm Beach County BBIC took a different approach. It has provided guarantees for loans made by local commercial banks.
Sometimes the collateral was a fraction of the loan. Sometimes the guarantee was 100%.
One of BBIC’s goals, then and now, is to overcome any ‘no’s’ a bank might have with a loan application, whether it’s a credit issue with the borrower. or the risk of a new business venture.
BBIC’s initial mission was to provide loan guarantee and reduce certain risks. In addition to loan guarantees, the BBIC provided educational programs and taught borrowers how to create business plans, marketing strategies, and accounting systems.
“Hairdressing salons. Mortuaries. Restaurants. Construction. Daycare centers. Whatever lies ahead, you name it and we try to do it, ”Howard said of the loan application. “We want to encourage entrepreneurship in the black community.
But BBIC’s status as a CDFI means it will be able to make loans, not just guarantee them, White said.
The new BBIC designation and creation of Pathway comes as the county’s growth accelerates.
The new sources of loan also coincide with the coronavirus pandemic and the decision of many workers to start their own businesses and manage their own destiny, White said.
White said the BBIC is working with a few potential borrowers who are refining a plan to start a physiotherapy business. Another potential borrower wants to buy another tractor-trailer to start a trucking business.
The newly expanded BBIC loan programs also come at a time when the pandemic has exhausted collateral from potential borrowers who may not qualify for a conventional bank loan, Brumley said.
“They may have run out of cash,” Brumley said. “This is where CDFI supports underserved people.”
Sometimes clients come to BBIC through the Black Chamber of Commerce. Other times, they are referred by banks that cannot provide loans due to banking policy.
“While banks might charge at least 680 or 700 in a credit score, we’ll come to around 650,” White said.
White said BBIC loans could total around $ 1.5 million in the coming year, with the Pathway program estimated at around $ 2.5 million in loans.
These loans do not count the partnerships the BBIC has with other nonprofit lenders, the Black Business Investment Fund of Orlando and the Community Reinvestment Fund of Minnesota.
By working through the BBIC, these nonprofits can provide funding and expand the loan pool available to Palm Beach County borrowers, White said.