Runaway valuations and the piles of money pouring into hot tech startups grab lots of headlines these days. That can make it easy to forget about traditional small businesses that might not have as much job-growth potential as startups, but still play an important role in the economy, especially in cities like Detroit.
Many in the local entrepreneurial ecosystem have also begun to voice concerns that Detroit’s reinvention as a tech hub won’t be sustainable unless the flood of new opportunities extends outside of the downtown business district.
Those factors are combining in the Entrepreneurs of Color Fund, a partnership between JPMorgan Chase, the Detroit Development Fund (DDF), and the Kellogg Foundation. The fund is a new, $6.5 million lending program for local minority-owned small businesses.
The Entrepreneurs of Color Fund is part of JPMorgan’s $100 million, five-year investment in Detroit, and it’s designed to provide financing to small businesses in neighborhoods outside of the downtown revitalization zone, which often have a hard time accessing capital. These mom-and-pop retailers have a long tradition in the Motor City, and are sometimes beacons of stability in otherwise distressed parts of town.
“Historically, small business has been at the heart of Detroit’s economic growth,” says Tosha Tabron, who manages JPMorgan Chase’s philanthropic efforts in Detroit. “We want to expand opportunities for all Detroiters.”
There are approximately 32,000 minority-owned small businesses in Detroit, according to U.S. Census data—the fourth-most of all cities in America, Tabron says. Yet, despite their importance to the economy, recent Brookings Institution research by University of Michigan law professor Michael Barr found minority-owned businesses rely significantly more on personal or family investments than on outside lending.
The fund hopes to bridge that gap by offering short- and long-term loans ranging between $50,000 and $150,000. It will also provide loan recipients with training in networking, marketing, business-plan development, and cash-flow management. To be eligible, small businesses must be majority owned by people of color or have more than half their workforce made up of people of color. DDF, which will manage the process, will also work with the Fisher Foundation’s entrepreneurial programs in Detroit.
If the program is successful, Tabron adds, JPMorgan plans to replicate it in other cities.
