Palm Beach County’s growth is creating demand for capital from entrepreneurs and small business owners. But when a company doesn’t meet the underwriting guidelines of the major banks, where can it turn to for help?
Beginning Nov. 15, the Black Business Investment Corp. will be a resource for a wide range of borrowers.
Formed in 1987 to make loans to Black-owned businesses, the BBIC recently expanded into a diversified lending source.
“We are Palm Beach County’s best-kept secret,” said Marlon D. White, president of the BBIC, which is based in Riviera Beach.
A new designation for the BBIC makes it a Community Development Financial Institution, an entity that provides affordable loans to low-income borrowers. This means the non-profit is very nearly a bank, except it does not take deposits.
Instead, the BBIC can partner with other lenders or make referrals, greatly expanding its lending capacity not only for business loans but for home loans, too.
The city of West Palm Beach recently awarded the BBIC $150,000 to do business micro loans, which are loans ranging from $5,000 to $20,000, White said. These loans feature interest only for the first four months and a 48-month repayment schedule, generous terms not typically offered by commercial banks.
Meanwhile, Palm Beach County recently boosted its contribution to the BBIC to $150,000 from $54,000, White added.
Loans are in demand not only from Black-owned businesses but from a range of business owners, leading the BBIC to increase its reach by creating a new affiliate, Pathway Capital Funding.
Pathway will be able to lend to businesses that are not Black-owned or Black-controlled.
About 60% of Pathway’s loans will be designated for women and minority-owned businesses operating in low-to-moderate income areas. The remaining 40% can be made to any business, regardless of ownership or operating area.
Bank of America was a key backer of BBIC’s efforts to become a CDFI and create the Pathway affiliate. The bank is the nation’s largest private investor in CDFIs.
In Palm Beach County, Bank of America pledged $2 million in a line of credit for loans to Pathway, plus another $75,000 to handle expenses, White said.
Fabiola Brumley, Palm Beach County president for Bank of America, said the BBIC’s lending expansion “is a natural progression” by leaders seeking to expand lending.
“We did not have a direct CDFI lender in Palm Beach County before, and we are very excited about having our own,” Brumley said.
Other lenders have stepped up, too, including the JP Morgan Chase Foundation, which this month gave Pathway a $300,000 grant, 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 that provided money to non-profits.
Other BBICs in the state did direct lending, but the BBIC in Palm Beach County took a different approach. It provided guarantees to loans made by local commercial banks.
Sometimes the guarantee was a fraction of the loan. Sometimes the guarantee was 100%.
A goal of the BBIC, then and now, is to overcome any “no’s” that a bank might have with a loan application, be it a credit issue with the borrower or the risk of a new business venture.
The BBIC’s original mission was to provide a loan guarantee and take some risk off the table. In addition to loan guarantees, the BBIC provided educational programs and taught borrowers how to create business plans, marketing strategies and accounting systems.
“Barbershops. Mortuaries. Restaurants. Construction. Day cares. Whatever comes before us, you name it and we try do it,” Howard once said of the loan demand. “We want to encourage entrepreneurship in the Black community.”
But the BBIC’s status as a CDFI means it will be able to originate loans, not just guarantee them, White said.
The new BBIC designation, and the creation of Pathway, come as the county’s growth surges.
The new loan sources also coincide with the coronavirus pandemic and the decision by many workers to create their own businesses and manage their own destiny, White said.
White said the BBIC is working with a couple of would-be borrowers who are refining a plan to create a physical therapy business. Another potential borrower wants to buy another tractor trailer to create a trucking enterprise.
The newly-expanded BBIC loan programs also come at a time when the pandemic has depleted the collateral of would-be borrowers who might not qualify for a conventional bank loan, Brumley said.
“They may have exhausted their liquidity,” Brumley said. “This is where the CDFI supports the underserved.”
Sometimes, customers come to the BBIC through the Black Chamber of Commerce. Other times, they are referred by banks that cannot make loans due to bank policy.
“While the banks might require at least a 680 or 700 in a credit score, we will come in at about 650,” White said.
White said the BBIC’s loans could total about $1.5 million in the coming year, with the Pathway program estimated to make about $2.5 million worth of loans.
These loans don’t count partnerships the BBIC has struck with other non-profit lenders, the Black Business Investment Fund of Orlando and the Community Reinvestment Fund of Minnesota.
Working through the BBIC, these non-profits can provide financing and expand the loan pool available for Palm Beach County borrowers, White said.