David O’Neal had been doing janitorial work in San Antonio for more than five years when he decided it was time to start his own business. One-and-a-half years later, Helping Hands Service Solutions has built up a commercial client base as well as its revenues.
But to take the business to the next level, O'Neal needed a business loan to purchase equipment and supplies. When a local bank couldn’t make a loan because of O'Neal's poor credit, it referred him to LiftFund.
This week, the 26-year-old O'Neal closed on a $7,000 loan, the result of his hard work and a new partnership announced Tuesday that aims to close the capital gap for black-owned businesses in the San Antonio community. The San Antonio Area African-American Community Fund (SAAAACF) of the San Antonio Area Foundation is providing an initial gift of $25,000 to LiftFund’s Dream Fund, a revolving loan fund, to support black business owners with loans and capacity-building training.
The announcement coincides with National Black Business Month, the 14th annual observation that began Aug. 1 and recognizes the importance of black-owned businesses in the community and national economy.
“We are honored to partner with the SAAAACF and appreciate their investment and support of our mission to empower business owners and help them create a better future for themselves and their families,” LiftFund President and CEO Janie Barrera stated in a news release.
“Our mission-driven approach allows us to work with entrepreneurs who might not be ready to access capital and coach them not only to receive funding, but also enhance their business skills.”
There are 1.9 million black-owned businesses in the U.S., according to 2007 census data, generating $137 billion in annual revenue. Today, about 14.3% of those businesses have been in business for less than two years, compared with 8.9% of all employer firms, according to findings from the Census Bureau’s 2015 Annual Survey of Entrepreneurs.
A collaborative survey between University of Texas at San Antonio and Bexar County last year found black-owned businesses here struggled with cash flow and capacity to grow their businesses and create financial stability. Black-owned businesses tend to have a greater need for credit but own fewer assets, and owners often have lower household incomes and bruised credit. Those factors can make it difficult for them to approach financial institutions for a business loan.
Another survey, conducted by the Association for Enterprise Opportunity, reported that only 6% of the black-owned businesses interviewed nationwide listed banks as their primary source of credit, compared to 23% of their non-minority peers. Of the black-owned businesses that qualified for loans, they received an average 50% less in credit than their peers.
The SAAAACF was established in 2008 under the leadership of the San Antonio Area Foundation staff, board members, and a steering committee made up of black community and business leaders. The outreach fund has distributed more than $90,000 in grants to charitable programs.
“I see [Dream Fund] as a start,” Deborah Omowale, chair of the Alamo City Black Chamber of Commerce, told the Rivard Report.
“I see it as a start to look at the disparity in funding African-American businesses," said Omowale, who is the innkeeper and co-owner of Eva's Escape at the Gardenia Inn. "If you look at the past record of LiftFund and funding African-American businesses, it’s been a challenge. But apparently some of their parameters have changed.”
When Omowale opened her inn five years ago, she met the credit criteria for a loan, but her lack of experience kept her from qualifying. Many small business owners, however, don’t have the credit scores they need for a traditional bank loan, and many finance their companies themselves, Omowale said.
“I started the business so it could be a legacy for my grandchildren,” Omowale said.
But now she’s selling Eva's Escape while her books are “in the black,” having built the business from nothing to No. 1 on several accommodation listing sites, so she can spend more time with her grandchildren.
“I would have a different business model,” she said of lessons learned.
One of the largest microlenders in the nation, LiftFund seeks to help entrepreneurs start and strengthen businesses, create employment opportunities, and contribute to economic revitalization in their communities.
Since 1994, the nonprofit has made more than $3.1 million in loans to black-owned businesses in the San Antonio area. Last year, those businesses made up 13% of LiftFund’s 2016 local portfolio, with more than $375,000 in business loans.
In that time, LiftFund has made over 19,000 loans totaling more than $250 million within its 13-state service area. And in its 2016 annual report, LiftFund reported that 59% of all its clients across those 13 states were Hispanic, 21% black or African American, 15% Anglo, 2% Asian and 3% other ethnicities.
The new partnership furthers the SAAAACF mission of inspiring philanthropy while meeting the needs of the black community, Fund Chairman Bobby Blount stated in a news release.
“The sole focus of the San Antonio Area African American Community Fund is to promote philanthropy and ensure funds are available to help improve the lives of African Americans in our community," he stated. "We are pleased to team with LiftFund to offer this new form of financial support in our community.”
Christopher Herring, chairman of the Texas Association of African-American Chambers of Commerce that represents 250,000 black business owners in Texas, said he didn't know anything about the partnership until he saw the press release.
But, he told the Rivard Report, "I hope the partnership symbolizes the start of a better relationship between LiftFund and the African-American business community."