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Local BIPOC entrepreneurs eligible for $10k no-interest biz loans

A community initiative aimed at "flipping the script" on access to capital will provide up to $10,000 in interest-free, three to five-year loans to selected local entrepreneurs who identify as Black, indigenous or people of color.

The Community Investment Corporation, a nonprofit focused on generating investment in Tucson communities, will manage the money and service the loans.

An eight-person committee will select which candidates will be rewarded these BIPOC loans, which will range from $500- $10,000. The loans will come from $100,000 collected in the group's Community Managed Loan Fund.

There is not application fee, and the CIC will pay a $100 stipend to applicants who complete the entire application process for the time spent applying. The stipend is meant to “flip the script” on how loans work by giving more incentive to the businesses than the lender, said CIC spokeswoman Jennie Grabel.

To qualitfy, at least half of a business's ownership must identify as BIPOC, the business must be located in Southern Arizona, and everyone must complete the application via video, audio, text or paper application. Startups are eligible, as are more established businesses.

CIC has received 16 application for loans from the fund thus far, but applications are still being accepted, Grabel said.

The committee wants a competitive selection of candidates, Grabel said. The window to apply to the program opened on July 19 and will be open until August 20. Applicants will find out whether they’re selected on September 14.

The agency wants to shift decision-making about the loans from the lender to community members, by giving them the power of selecting who qualifies, according to the information page on the initiative. To do this, CIC officials said they created the selection committee with employees from local businesses, agencies and organizations including Tucson Electric Power, the Pima County Attorney’s Office, the Tucson Urban League, Casino del Sol and two from Blax Friday; these committee members also self-identify as BIPOC and act as leaders in their own communities, Grabel said.

Blax Friday, which originally started as a directory for Black-owned businesses in Arizona and now works to support Black business ownership, is a partner with CIC in the initiative along with Startup Tucson, a nonprofit that invests in new local small businesses.

Grabel said that the initiative grew out of a desire by “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.” The loans are a way to reduce racial inequity in Southern Arizona by improving access to capital for BIPOC communities, CIC officials said.

According to the CIC, 85 percent of entrepreneurs start their business with money from friends and families. This is what creates a racial inequity in entrepreneurship, Grabel said, as white families have, on average, 10 times the wealth that Black families do and five times the wealth of Hispanic families.

The amount of family wealth for indigenous families, Grabel said, hasn’t been tracked since 2000, but at that time the disparity was greater than that for Black families.

CIC already does lending in the community, which is why staff saw this as a way they could take to confront racial inequity, Grabel said.

According to the Tucson Metro Chamber, the CIC meets its community investment and development goals through three programs: down payment assistance for homeownership in Tucson, post-issuance disclosure compliance for charter schools using tax-exempt bond financing, and financing for small businesses and nonprofits.

The CIC is directing their committee to develop new qualifications for who gets loans. CIC tasked the committee with establishing and defining underwriting criteria, the loan application details and the process for approval along with determining which applicants are approved, but the goal is also to avoid “traditional economic structures and capital access mechanisms” because they limit the access to financial support BIPOC individuals, families and entrepreneurs need when starting businesses, according to the CIC.

The approach, Grabel said, is to avoid traditional barriers to capital for BIPOC communities as much as possible. She said that the committee and CIC want to be transparent so everyone knows how decisions are being made and to have an educational role with the businesses taking out the loans so they know where else to find capital and have sustained success.

Committee members Terrell Henry, who works for Blax Friday, and Lesah Sesma-Gay, the executive director of community relations for Casino Del Sol, said that they’re excited to change the way lending is done and to give members of their community some hope for success.

“We’ve really learned a lot about the lending process and how we can make a difference and really change the scope and transform how things are done here traditionally,” Henry said.

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“I chose to devote my time to this committee because it is something that I believe will assist the wonderful people of my community who are either scared to take a chance or have been knocked down but are not ready to give up,” Sesma-Gay said. “This program is unlike any other in Tucson, and I am so proud to be part of the committee to build and continue to move forward with helping BIPOC businesses.”

The loans will come with a zero-percent interest rate in the first 5 years of the formalized ownership, and the loans will come from a “revolving loan fund” put together with money from interest and principal payments from existing loans underwritten by the CIC.

The revolving loan fund also means the pool of money supporting it should be “self-replenishing.” Payments to the loan will go towards fundraising to continue offering the loans in the future, but CIC officials said that a nominal interest rate may be applied to offset administrative costs.

The CIC is also actively fundraising to increase how much they distribute in 2021 by at least $100,000, and they aim to have $1 million in the fund within three years.

“As loans are paid back, they will go back into the pool, and they will fund the next loan. So it really is about paying back your loan to pay it forward to the next entrepreneur or small business owner,” Grabel said. “Our dream is that this builds and builds and builds and becomes a new normal in our community for traditional lending.”

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

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Community Investment Corporation

The local nonprofit Community Investment Corporation is servicing loans worth between $500-10,000 to entrepreneurs who identify as Black, indigenous or persons of color (BIPOC) as a way of directly addressing racial inequities in Southern Arizona.

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