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$10k interest-free loans available for Tucson BIPOC biz owners

2nd year of Community Investment Corporation program will total $300K in microloans

The local nonprofit Community Investment Corporation is accepting applications for a second year of microloans for minority-owned small businesses in Southern Arizona. Eligible businesses need to be owned, at least in part, by anyone who identifies as Black, Indigenous or as a person of color for the BIPOC loans.

In 2021, 15 young business owners received as much as $10,000 in interest-free loans out of $100,000 that was available through the CIC program during its inaugural year. This year, the available funding for this year's loans has tripled to $300,000.

To qualify for the loan:

  • At least 50% of business owners must identify as BIPOC
  • Business must in Southern Arizona
  • Business can be in any stage of development, including startups

Applications are free, but the CIC will no longer offer a $100 subsidy for any business owner that completes the application as they did last year. Businesses can ask for a minimum loan of $500, which few do as most awards are either $5,000 or $10,000.

The narrative that entrepreneurs tell through their application will be the “primary factor” in choosing winners, said CIC Executive Director Danny Knee.

Three to four loans will be awarded per month, which is a change from last year, when all the loans were awarded at the same time. The CIC expects to award 36-40 awards in a year’s time with the new format.

Applications will be reviewed once a month, and the first set of winners will be announced around August 5. The new format eliminates hard deadlines as new application windows will open at the start of each month.

BIPOC committee does '100% of the decision making'

Winners will be selected by a committee of BIPOC community members from outside the banking and finance industry. The selection committee will “have 100% of the decision making” for loans, including credit eligibility and how much each winners is awarded, Knee said.

The CIC goes to non-banking or finance backgrounds for the committee to craft an “innovative application and approval process,” Knee said. Banking professionals are “sometimes part of the problem” of racial inequity, Knee said, but the BIPOC selection committee chooses their own standards for credit-worthiness to get around that.

“(Traditional underwriting) just does not meet the needs of all the people who need financing,” Knee said. “BIPOC entrepreneurs, in general, are denied credit more often, they’re charged higher rates of credit for getting a loan, and so there are really problematic outcomes.”

The application is “really easy,” Knee said, but “there’s a little more work after they hear ‘yes.’” Applicants may have to complete additional requirements that the committee recommends as a condition of the loan.

The selection committee can recommend applicants learn a few skills before receiving the loan. Startup Tucson and the YWCA Southern Arizona, both partners with CIC in the program, will offer applicants training in business basics, marketing, profit and loss reporting and using balance sheets, among other courses. The program also offers to connect entrepreneurs with mentors or subject-matter experts.

The format is meant to “respect people’s time” and allow applicants to know if they’re approved or rejected before they put too much time into gathering material and filling out the application, Knee said.

“In a typical loan process, there’s a lot of documentation collection, all these things. It can feel a bit like black box. People don’t know what makes them qualified,” he said. “They gather all that stuff and can hear ‘no.’ I don’t think that it respects people’s time quite enough.”

CIC announced 16 winners of the BIPOC loan last year, but only 15 ended up receiving the money because one dropped out while going through a financial analysis after being approved. The entrepreneur “decided they weren’t ready for the loan yet” after they were approved, Knee said.

“We think that’s a win,” Knee said about losing the applicant last year. “They had the agency to decide that it was quite right and they weren’t ready for that just yet.”

The CIC approved $102,000 in loans last year, but they only awarded $94,000 after the one entrepreneur dropped out.

'Calls for racial equity and justice'

Last year’s selection committee had members from local businesses, agencies and organizations such as Tucson Electric Power, the Pima County Attorney’s Office, Casino del Sol and Blax Friday. The CIC has no representation on the committee.

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CIC staff is “simply providing the resources, the money, and the administrative horsepower, being able to use our expertise to deliver and service the loans,” Knee said. CIC staff are volunteering their time to work with the program.

The mission of the CIC is to generate cash investments for residents and small community-oriented projects in Pima County. They’ve also had a central role in managing the eviction prevention fund put together by the county and the city of Tucson.

The BIPOC loan program started in 2021 but stemmed from “CIC staff wanting to do something actionable, wanting to do something tangible in the wake of the murder of George Floyd in the summer of 2020,” their former spokeswoman said last year.

The CIC looked to funding entrepreneurs of color to answer the “calls for racial equity and justice” from 2020. The initial funding for the program came from $2,700 in donations from every staff member at the CIC.

When the CIC began the BIPOC loans, they reported that 85% of U.S. entrepreneurs started businesses with cash from friends and families, but White families had five times the wealth of Hispanic families and 10 times the wealth of Black families. The disparity in family wealth is even greater for Indigenous families than it is for Black families, according to the CIC.

Local companies BLAX Friday and Startup Tucson worked with the CIC to start the BIPOC loans. Other companies such as Tucson Electric Power, United Way of Tucson, Women’s Foundation, Cox Communications, the Tucson IDA, Pima IDA and PNC Bank donated to this year’s fund.

All paid back by the business owners to the loan goes to next year’s BIPOC loans as part of a revolving fund. The CIC tells winners of the loan that they should "pay it back to pay it forward.”

The revolving fund is getting closer to the point where repayments alone can sustain the next year’s fund, instead of relying on donations alone. The success with the revolving fund model is what’s allowed the CIC to start offering the awards monthly, Knee said.

The first round of BIPOC loans in 2021 went to entrepreneurs who were printers, designers, farmers, cleaners and media professionals, among others. Some of the business included Fungirl’s Fungi, which sells gourmet mushrooms, and Barrio Books, a bookstore for BIPOC authors.

Bennito L. Kelty is TucsonSentinel.com’s IDEA reporter, focusing on Inclusion, Diversity, Equity and Access stories, and a Report for America corps member supported by readers like you.

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Community Investment Corporation

The 2021 recipients of funding from the BIPOC loan fund.