LISC Entrepreneurs of Color Fund reaches $500 million goal, sets new benchmark of $1 billion in small business lending

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Local Initiatives Support Corporation (LISC)

Oct 23, 2024, 11:38 ET

NEW YORK, Oct. 23, 2024 /PRNewswire/ -- The Local Initiatives Support Corporation (LISC) today announced that the Entrepreneurs of Color Fund (EOCF) has surpassed its $500 million goal for small business lending across the country—more than two years ahead of schedule. LISC is now expanding the program to double its impact, aiming to support $1 billion in financing for underserved businesses and communities.

"We are working to level the playing field—to connect promising but overlooked businesses to affordable financing so that whole communities can benefit from economic development and growth," said Steve Hall, LISC vice president of Small Business Lending.

EOCF is specifically designed to strengthen the local infrastructure for small business lending. It provides grants, loans and technical assistance to community development financial institutions (CDFIs) so they can better reach businesses that the traditional market does not serve.

The program particularly addresses capital gaps that affect communities of color. According to the Federal Reserve, Black and Latino small business owners are turned down for financing at more than twice the rate of their white counterparts. Those owners are also more likely to say that a lack of financing is a significant challenge to their business success.

"We want to expand financing opportunities so owners can buy a building, purchase equipment, increase their inventory or expand their staff," Hall said. "The $500 million deployed thus far is an investment in local wealth-building. It not only benefits businesses and their employees but also expands access to goods, services and jobs for residents in the communities where these firms operate."

EOCF currently partners with 24 CDFIs in 10 metro areas, including Atlanta, Chicago, Detroit, Los Angeles, Miami, Newark, New Orleans, New York City, Oakland, and Greater Washington, D.C. Together, they have supported more than 9,500 loans to small businesses in the retail, business services, food, small manufacturing and transportation sectors. Approximately half of the borrowers serve low-to-moderate income communities.

In their most recent survey of owners, EOCF found that 62 percent of firms increased their staffing after obtaining a loan, and 55 percent saw revenue growth. In addition, because of the high-touch business services provided, 82 percent of owners with a low credit score when they applied for a loan (below 651) were able to increase their score, which better positions them for conventional financing in the future.

Johnnie Akons, owner of Legacy Cutz in Chicago, is a good example. Unable to get a conventional loan to move out of rented space, he worked with LISC and EOCF to open his first real estate loan for his barbershop, grow his staff, build his financial expertise and, two years later, purchase commercial space for a second location. Both shops serve majority-Black communities.

"Even with all the hard work and everything I put into this business and this industry, it would be basically impossible to grow if I hadn't been able to get these loans," he said.

In addition to financial support, the EOCF team collaborates with local CDFIs to identify barriers that block the flow of capital—like outdated underwriting approaches or gaps in digital access—and develop products and services that respond.

"It is clearly possible to successfully implement fair and inclusive lending policies," Hall said. "But it requires a different way of thinking about the process and a willingness to step back from traditional notions about risk."

Supporters of the EOCF program include JPMorganChase and the W.K. Kellogg Foundation—which piloted the EOCF in Detroit in 2015, before LISC took the reins as program manager in 2020—as well as Fifth Third Bank, Prudential, The Rockefeller Foundation and U.S. Bank.

For more information, visit www.lisc.org/eocf/.

About LISC
LISC is one of the country's largest community development organizations, helping forge vibrant, resilient communities across America. LISC works with residents and partners to close systemic gaps in health, wealth, and opportunity and advance racial equity so that people and places can thrive. Since its founding in 1979, LISC has invested $32 billion to create more than 506,000 affordable homes and apartments, develop 82.5 million square feet of retail, community, and educational space, and help tens of thousands of people find employment and improve their finances. For more, visit www.lisc.org.

SOURCE Local Initiatives Support Corporation (LISC)