Lenders double as defenders
Nontraditional groups give aid to businesses owned by minorities
Red Harris,
evening early last week in Ferguson, Missouri, a dozen people formed a human chain around Reds The One and Only BBQ, a restaurant. Vandals had smashed other storefronts in the area amid protests over the killing of George Floyd in police custody, but Reds was still standing.
By forming a protective line around the restaurant, the group was hoping to discourage any further violence. For two hours, members of the chain kept vigil. But they were neither hired guards, nor friends or relatives of the restaurant’s owner, Red Harris.
They were employees of Harris’ lender, a community organization called Justine Petersen.
Galen Gondolfi, a senior loan counselor at Justine Petersen, said the gesture was largely symbolic because his group was not set up to provide physical protection. He said it was a way to show clients its commitment “literally and figuratively.”
Groups such as Justine Petersen, which mostly lend to minority-owned businesses across the United States, are not regular banks. They are Community Development Financial Institutions, and they use a combination of government funds and private donations to seed businesses that banks won’t deal with because they view their owners as too poor and too disconnected from the financial system to qualify for standard loans.
Many CDFIs, which first came into existence in the early 1970s, evolved out of groups that were formed to help minorities recover from attacks. More recently, during the coronavirus pandemic, such groups have been the go-to lenders for minority business owners who could not find a bank to help them tap a federal government aid program.
CDFIs, which are often nonprofits, offer their borrowers far more than just cash. They also walk them through the myriad paperwork required to get their businesses up and running, offer management training and sometimes provide spaces from which to launch.
But the looting and damage that have marred protests in the past week have added a new set of tasks for many of these organizations, akin to those of a security guard or emergency worker. In places like Ferguson, Minneapolis and Wilmington, Delaware, where violent groups have deOne stroyed property by smashing windows and setting fires, representatives from these lenders have been the first to make contact with devastated business owners and help organize their defense.
CDFIs have helped revive poor neighborhoods, replacing empty storefronts with active commercial spaces, increasing local economic activity, building residents’ wealth and reducing crime.
Because they make a wide variety of loans, including for housing, they amass deep knowledge of their neighborhoods and can tailor their activities to the area’s needs.
Over the past 35 years, they have made loans that helped start more than 400,000 small businesses around the country, according to the Opportunity Finance Network, the trade group that represents them. Around 58% of their borrowers are minorities, according to the trade group’s data.
Their lending, which is a mix of small business loans and loans to housing and community facility projects, has totaled more than $74 billion over that time.
In Minneapolis, three organizations that focus on minority businesses have helped transform the Midtown neighborhood from a depressed area to a trendy spot.
The charitable aspect of the groups’ missions has helped keep the ills of gentrification at bay.