As a leader in small business lending, the Detroit Development Fund continues to thrive, but its most recent partnership with the W.K. Kellogg Foundation (WKKF) and JPMorgan Chase Co. to create the Entrepreneurs of Color Fund could have an even greater impact on developing small businesses in Detroit.
The DDF facilitates the Entrepreneurs of Color Fund, which provides financing for various small business and retailers, neighborhood service business and general contractors. Since the fund was launched in September 2015, seven loans have been awarded to Detroit-based businesses, totaling $558,000 with an average loan size of $79,714.
For nearly 20 years, the DDF has provided small business loans primarily to business owners of color in Detroit and operates workforce development training programs. WKKF support has helped DDF increase its lending and insure the efficacy of those loans.
“While we don’t exclusively lend to minorities, we have made this a focus because a lot of these companies just don’t have access to capital,” said Ray Waters, DDF president.
Between 2002 and 2014, DDF issued 231 small business loans. Last year, the average business loan was $123,000. Since 2005, 100 percent of their loans have been made in the city, and of the 147 loans DDF has issued over the past five years, 75 percent have been to companies owned by people of color.
H. Julian Hill risked losing his business, Celebrity Car Wash on Detroit’s North End, two years ago when his lender restructured its portfolio and could no longer support Hill’s loan.
In jeopardy of losing the car wash he owned since 2000, Hill reached out to the non-profit Detroit Development Fund (DDF) to refinance his $250,000 loan and keep his business afloat.
“Without the loan there would be no business,” Hill said. “There would be just another dilapidated building in the area and another building for crime.”
The core of DDF lending goes to support housing development and rehabilitation, retail and commercial mixed use development and rehabilitation. The organization also has partnered with a number of community organizations and contractors to support workforce development programs. Overall, DDF loans have helped create 1,602 jobs and retain another 1,153 in the city.
“Every job that’s created in Detroit is a job that wasn’t here before,” Waters said. “We think it’s vitally important to support small businesses because we really believe they’re the backbone of Detroit.”
Waters considers DDF to be an “alternative lender” because the companies that they support aren’t considered “bankable.” He said the organization conducts a review process of borrowers under similar standards that other financial institutions follow, examining things like a person’s credit history and personal financial statements.
But Waters said DDF “looks at things differently” than most traditional banks, noting a bad credit score might not necessarily hurt a borrower’s chance for assistance.
“Sometimes there are good reasons why credit scores aren’t that strong and we try to look into it,” Waters said. “People may have gotten sick or gone through a divorce which led to the situation they’re in.”
Marisa Garcia and Steve Guzina received a DDF business loan to open a third location for their jointly-owned restaurant Tijuana’s Mexican Kitchen located in Detroit’s Warrendale community. When a former landlord contacted the couple to see if they had any interest in returning to their original location, the couple jumped at the opportunity. For them, the restaurant business helps them give back to the city.
“They seem to take character into consideration, it wasn’t just a numbers thing,” Guzina said. “We might not be a Fortune 500 company, but they saw everything was paid and that we were making personal sacrifices to sustain our business.”
“It was the food, too,” Garcia said, chuckling.
With a lot of redevelopment focused in downtown Detroit, Waters said it’s important these same opportunities and jobs be available in the city’s neighborhoods.
“There are awfully good people out there and with an opportunity to be retrained they can get back into the workforce,” Waters said. “At the end of the day, the more jobs we have the more family stability we’ll see down the end of the road.”
With the DDF’s facilitation of the Entrepreneurs of Color Fund, this appears certain. Of the seven loans awarded – five companies are owned by entrepreneurs of color; one is a vocational company that primarily trains and employs people of color; and financing from the fund has already helped retain 18 existing jobs and is expected to create an additional 29 jobs for Detroit residents.