Advancing A New Approach
Research shows that most entrepreneurs are not adequately supported by existing capital and investment structures. That’s why the Kauffman Foundation works hard – alongside many grantees and partners like the Kansas City Chamber of Commerce and LOCUS Impact Investing – to identify and deploy innovative models for creating more equitable access to capital for underrepresented entrepreneurs. The Kansas City Credit Enhancement Fund (“Fund”) is one such innovative model.
The Fund creates greater access to capital for small businesses in the Kansas City metro area by providing incentives for banks, CDFIs, and other lending institutions to invest in businesses owned and operated by entrepreneurs in low- and moderate-income neighborhoods, especially those who are Black, Indigenous, and people of color.
Creating Greater Access to Capital
When the dust settled from the Paycheck Protection Program, it was obvious there was a problem. Of the 4,677 PPP loans awarded to Kansas City area businesses, only 24 went to Black-owned firms, 34 to Hispanic-owned firms, and 33 to Asian-owned firms.
The issue: too many minority-owned firms don’t have a relationship with a bank, which would have eased their application for federal dollars.
So about two years ago, the Chamber convened a group of bankers, entrepreneurial support organizations, foundations, and businesses to help close that gap. We’ve showcased minority business owners to the organizations that can provide them support, and we’ve hosted networking events bringing those groups together.
Now, an exciting new effort supported by the Ewing Marion Kauffman Foundation can help bridge the gap: a new Loan Loss Reserve Fund.
Here’s how it works. The Loan Loss Reserve Program will work with approved lenders to provide loan loss reserve funds that support lending to entrepreneurs in low- and moderate-income neighborhoods, especially those who are Black, Indigenous, and people of color.
And a huge thank you to all our banking members, Kauffman Foundation, and the many others who have been so committed to this work. In true Kansas City spirit, we rallied around one another to work towards lasting solutions. It does my heart good.
Collaboration is Key
LOCUS Impact Investing Vice President Jay Beekman remarked, “Developing the Kansas City Credit Enhancement Fund has been a fantastic experience and truly collaborative effort with the Ewing Marion Kauffman Foundation and local stakeholders such as the KC Chamber, entrepreneurial support organizations, and lenders.”
Beekman continued, “LOCUS is excited to work with this group of partners to achieve the Fund’s goal of greater access to capital in a community that is so committed to place.”
The Fund’s initial incentive program, the Loan Loss Reserve Program, is accepting applications from interested lenders through the end of November 2022.
For more information about the Fund, its loan loss reserve program and how your lending institution can participate, please contact Jeremiah Houle at LOCUS Impact Investing.