A Detroit-based organization run by an all-black management team has created a fund to help black business owners who otherwise wouldn’t seek financing to scale their businesses.
Black Leaders Detroit set up an interest-free loan program in January with the goal of distributing $500,000 in loan funds in 2022, with a maximum allocation of $20,000. The group, led by CEO and co-founder Dwan Dandridge, and COO and co-founder Kevin Elkins, through two funding rounds, distributed $250,000 in loans to 17 black-owned businesses, ranging from hair salons and bakeries to construction and moving companies. The loans will be granted quarterly. Applications are open in January, April, July and October. Funds are distributed in April, July, October and January of the following year.
The need for funds is there. In the first three months of the program, Black Leaders Detroit received 212 loan applications totaling $2.2 million in loans, according to Dandridge.
“We see a lot of people applying with us who wouldn’t go anywhere else,” Dandridge said. “Black business owners’ concerns often center on why they’re being turned down by a conventional lender. Is it because they’re not qualified, or is the financing just not there? for them? With (Black Leaders Detroit), that blackness won’t work against them.”
Founded in 2019, Black Leaders Detroit works through grants and loans to provide Black business owners with access to capital and eliminate an equity gap. A study of Federal Reserve data found that black and other minority business owners are much less likely to receive the financing needed to operate a business and that the average loan for a white-owned small business is d about $30,000 higher than a BIPOC company.
The loan program has been running since the organization’s inception, which through various programs has distributed $733,000 to 167 Black-led businesses and organizations. About 60% of these businesses are run by black women.
Black Leaders Detroit has worked hard to get its message across to as many people as possible. The group set up a challenge looking for one million people to contribute $1 a week to help uplift black business owners in Detroit. On several occasions, Dandridge cycled from Detroit to Mackinac Island to raise funds for Black Leaders Detroit.
The loan program will undoubtedly increase that figure and help many other business owners, Dandridge said.
Interest-free loans come with no hidden fees, with recipients having three years to repay the funds and a 60-day grace period before the first monthly payment is due. For approval, each business must be located in Detroit and majority black-owned. Potential winners must be registered with the State Department of Licensing and Regulatory Affairs and have been in business for at least one year. Approved applicants must have a co-signer, guarantee, or show receivables to obtain funding. Applicants requesting more than $10,000 are interviewed by the Black Leaders Detroit fundraising council, while those requesting less than $9,000 meet with a panel of Black Leaders Detroit employees. Loans are handled by Black Leaders Detroit loan manager Kevin Taylor. Businesses whose funds have not been approved are referred to technical assistance providers for assistance before reapplying.
Black Leaders Detroit’s goal is to eventually be able to fund every loan application, Dandridge said. The plan also calls for the maximum loan amount to increase to $50,000 in 2023.
“We want all loan applications to meet our criteria,” Dandridge said. “This is our pilot year. I don’t see things going anywhere other than up.”