The Rocket Community Fund, the philanthropic arm of Rocket Cos. in Detroit, Community Reinvestment Fund USA (CRF) in Minneapolis, Invest Detroit, and Barton Malow Co. in Southfield announced the launch of the $10 million Motor City Contractor Fund pilot program.
The program seeks to remove barriers and provide 20 Detroit-based contractors with a suite of services to grow their capacity and succeed in the competitive local marketplace. The services include lending, technology, and business advisory services, and community-based partnerships to meet the cash flow and business needs of participating contractors.
“Development continues to exponentially increase across our city, which will catalyze economic impact, and it is critical that Detroit-based contractors are well positioned to be a part of that growth,” says Laura Grannemann, vice president of the Rocket Community Fund, which is investing the first $1 million into the program’s administration and operations.
“Detroit-based contractors have historically been overlooked, but the Motor City Contractor Fund will increase access to financing for local contractors, empowering them to grow their business and create more jobs for Detroiters.”
Small contractor companies in Detroit, primarily run by entrepreneurs of color, have been unable to compete with larger and non-minority owned contractors for several reasons — among the most significant, is access to financing.
Many smaller, minority-owned firms have historically been turned away by traditional lending institutions due to institutional racism and perceived risk because of the cyclical nature of the industry. Research consistently shows that they are often forced to endure higher interest rates on the loans they do receive which stimies their ability to grow and succeed.
Minority-owned firms also receive smaller equity investments than non-minority firms and have less wealth to invest in their own business. Minority-owned firms invest less than $30,000 on average after the first year of operation, compared to $45,000 for non-minority businesses.
Additionally, small and minority-owned contractors often lack the digital presence and resources required to competitively advertise, bid, and successfully complete projects. By combining flexible lending with business advisory services, partnerships, and technical assistance, the Motor City Contractor Fund pilot program can more easily meet the business needs of participating contractors.
CRF, a nonprofit that works to create a just economy for all by co-creating innovating financial solutions, is serving as the lead arranger of the Motor City Contractor Fund pilot program. CRF will manage the pilot, coordinate its financial product, lead pilot structuring, coordinate loan agreements to provide capital for the pilot, manage the website, facilitate job providers, and engage partners.
“Financing is the single largest barrier to entry for contractors, and contractors of color are often only able to access high-interest financing or no financing at all,” says Krysta Pate, vice president of economic and social justice for CRF. “By providing the critical low-interest loans for working capital, the pilot program for the Motor City Contractor Fund enables participants to have equitable access to financing and to the opportunities it affords.”
During the first phase of the program, CRF will carry $8 million on their balance sheet to ensure the first cohort’s participants have access to critical financing. Working capital expenses typically include upfront payroll expenses, costs of goods, materials, rent, equipment rental, accounts payable and more.
The Motor City Contractor Fund pilot will make flexible, low-interest loans to address these pressing capital needs of participating contractors with 12-month terms that are renewable annually. All loans associated with the Motor City Contractor Fund pilot program are subject to credit approval and meeting eligibility criteria.
Each participating contractor will also receive a grant of $5,000, to be used in accordance with its customized business growth strategies on expenditures like credit repair, bonding capacity, developing an online presence and capabilities statements and more. Invest Detroit will support CRF and serve as a loan originator for the Motor City Contractor Fund pilot program.
“Detroit-based projects deserve Detroit-based contractors and a Detroit-based workforce, ensuring that we are able to grow and preserve wealth in the Motor City,” says Jason Barnett, senior vice president of lending for Invest Detroit. “The Motor City Contractor Fund allows us to deploy dollars to our friends and neighbors who are building Detroit’s next chapter.”
Contractors will be placed into one of three technical assistance curriculum categories:
- Fast track includes emerging contractors that have projects in queue, meet most funding requirements and are ready to apply for funding.
- Fortified track includes emerging contractors that have potential projects in queue, meet many funding requirements and are not immediately ready to apply for funding.
- Foundation track includes any contractors without a pipeline of potential projects, or that do not yet meet funding requirements.
Detroit-based LifeLine Global Consulting will administer all aspects of the industry-specific technical assistance for each track, which will provide contractors with intervention and navigation support, on-demand learning, and coaching from industry experts. LifeLine Global Consulting is a full-service business planning and consulting organization serving small-and-medium-sized companies with an emphasis on minority and women-owned businesses.
“Now, more than ever, contractors are expected to be an expert in topics ranging from building standards to social media management and everything in-between,” says Nicole Parker, executive director of LifeLine Global Consulting. “By utilizing a holistic approach to training contractors, we can ensure that Motor City Contractor Fund participants are empowered with the knowledge and resources they need to thrive in the current landscape.”
Barton Malow is working closely with LifeLine Global Consulting to provide many of the training modules, as well as ongoing mentorship and business advisory support to Motor City Contractor Fund pilot program participants.
“We’re proud to do our part to help fill the gap of Detroit-based contractors, so that they may be part of the unprecedented development we’re seeing across the city,” says Dannis Mitchell, director of community engagement for Barton Malow. “We look forward to working with the Motor City Contractor Fund participants throughout their cohort, as well as alongside them on future projects across Detroit.”