More capital for Black contractors
$40M aims to improve ability to grow or create business opportunities
Black contractors in Michigan can participate in a $40 million initiative that will give them access to capital at a low cost.
As a part of what is called the Capital and Cash Flow Program, $10 million is readily available to contractors in Detroit. The initiative is led by the Black Caucus Foundation of Michigan in partnership with DRI Fund, ProFinCo and Crowdz. Together, the organizations and entities plan to increase sustainability and scalability for contractors when it comes to access to capital.
The partners said they have created a userfriendly process in which contractors can get access to funding within a few days, rather than taking typically up to 120 days.
“We want to make sure that people know that there's a tool and the Black Caucus Foundation has a resource, has a pathway to getting that compliance and access to capital to grow or create a business opportunity,” said state Sen. Marshall Bullock, D-Detroit, who is chairman of the Black Caucus Foundation of Michigan.
The Black Caucus Foundation of Michigan is a nonpartisan organization that works on creating public policies, leading educational and economic research and hosting programming for families and children. With the help of its partners in this initiative, it expects to fund the first contractors by the end of the month.
The program has several goals. First, it wants to increase the speed of payment by up to 80%, a news release said. It also wants to offer more access to technical support, increasing the chances a contractor will receive opportunities with the state’s public works and infrastructure projects.
“We took a look at all of the working capital solutions, supply chain solutions that were out there,” said Christopher Aldridge, a managing member of ProFinCo, “and we settled on a structure that’s been used for the last 50 years. We combined it with a fin-tech platform to make it ultra efficient so that we can offer market-rate returns to capital, even on a risk adjusted basis, so that when the crisis is over, market-rate investors will still be (incentivized) to participate in this program.”
The program will finance the projects that the contractors are working on and there are no set limits on how much funding they will receive. The first $10 million will be distributed based on the size of each participating contractor’s project, so there is no set number of contractors who can receive assistance.
“We are going to look at each project — how to help someone, how to help that project, how to help that minority business grow and fulfill their obligation to the contract with our help,” said Bullock. “We are going to give them a twoyear mentor who's going to help them manage and do all that technical service.” Contractors will also be able to gain a relationship with a bank.
Contractors can receive the funding as a low market-interest loan, and that funding is coming from private investors. One of the barriers
contractors may face comes when borrowing money from cash advance firms. Aldridge said the “economic violence” that comes from these firms almost put a few of the contractors that they have worked with out of business.
“When we saw the circumstances that created the need for them to go to that predatory lending resource, we designed a program that leveraged the same underwriting approach that they used in a much more user-friendly structure,” said Aldridge. “We can, once we get all of the required information from the client, literally turn a lending decision in 72 hours, and fund within 48 hours.”
Aldridge notes that by supporting these contractors, they will be able to work on Detroit’s substandard housing units, which are homes that have a decent structure but may have unsafe or unhealthy living conditions. Although there are many repair funds to provide capital to small or disadvantaged contracting businesses, Aldridge said the financing process can take up to 90 days to get an invoice and an additional 30 days to get paid.
“The missing element is how do you get those projects done by contractors that may not be well capitalized,” Aldridge said. “If they're not well capitalized, they're not able to … front the materials and labor until they receive payment under all these programs.”
There also are plans to service vendors of the Detroit Community School District, and connect minority contractors with the Michigan Department of Transportation.
“MDOT applauds the creators of this new Capital & Cash Flow Program, which we believe will enable more minority owned businesses to enter the public sector infrastructure market and grow their businesses,” says Tony Kratofil, chief operating officer for the Michigan Department of Transportation, in a news release. “The Bipartisan Infrastructure Law has created unprecedented levels of investment that represent opportunities for minority-owned contractors to participate in building up our communities and the infrastructure they rely on.”
Bullock used to work for the city of Detroit as a liaison for minority contract affairs. He hopes to take what he and his partners have learned within the city of Detroit statewide.
“We're trying to not just do this in Detroit, but I'm also the chairman of Michigan Legislative Black Caucus,” Bullock said. As the partners looked at their research, they found that the lack of access to capital was top of mind for business owners. “The same issues go for Benton Harbor and Muskegon Heights, and Saginaw, and Pontiac, and so we're trying to pilot it in such a way that we can duplicate it in those nuanced communities.”
Contractors can apply for early enrollment in the Capital and Cash Flow Program at capitalandcashflow.com.