The Business Journal is reporting on the creation of a venture capital group seeking certification as a U.S. Department of Treasury Community Development Financial Institution. It would be only the second in Grand Rapids. The significance is remarkable as it offers another tool specifically focused on minority inclusion and access to capital. The racial gap in the rate of loans issued by traditional lenders is significant, according to research and surveys. Add to that the recent grbj.com report showing the Grand Rapids metro area ranked 39th most residentially segregated among the 100 largest U.S. metros studied by Apartment List, an online rental marketplace.
The W.K. Kellogg and the Grand Rapids Community foundations are among the funders for Rende Progress Capital, which will focus across the state of Michigan on “excluded entrepreneurs.” The firm’s two partners expect to begin offering loans in the fourth quarter of 2018. CDFIs leverage federal dollars alongside private capital to inject funds into neighborhoods that lack access to capital.
It also is notable that Grand Rapids Community Foundation’s priority in participation is assessing the social impact of its partnership with RPC rather than rate of return on its investment. Laurie Craft, vice president for community investment, told the Business Journal GRCF is expecting a “below-market rate of return” on the $200,000 loan.
Grand Rapids Opportunities for Women announced last October it had received CDFI designation from the U.S. Department of Treasury and had received its first CDFI grant of $125,000. GROW has a nine-county service area. In 2016 alone, the nonprofit organization assisted individuals to establish 62 new businesses and create 250 jobs in low- and moderate-income communities. As CEO Bonnie Nawara noted in Business Journal reports, the Treasury program brings additional federal dollars back to Grand Rapids.
RPC partner Eric Foster noted, “Forty-six percent of African-American business owners are turned down from loans by traditional lenders versus 12 percent of their white counterparts. We look at things in totality and not focus on the prerequisites that a bank would.” He noted the U.S. Census shows 180,000 minority businesses operate in Michigan.
Craft also noted “economic success across all sectors of our community raises all boats.” The Business Journal concurs.