$25 million has been pumped into Fort Worth businesses, many underserved. Here’s how
Esmeralda Polanco was searching for an opportunity to grow in a career when she came to the U.S. from Mexico in 2016.
She had experience in sales management and working in a family business, but wanted something different. When she moved to the U.S., Polanco spent eight years in different roles until she was convinced to start her own business.
“Because I have experience, … five years in roofing, people told me, ‘Why don’t you start your own business?’” Polanco said. “Because in another store, I ran everything, from sales, customer service ... I said, ‘Why not?’”
When she needed a loan to get started, she learned about CDFI Friendly Fort Worth, which is a nonprofit that matches lending institutions to small business owners. After applying online and receiving a consultation, she was matched with CDC Small Business Finance, a nonprofit organization that offers low-cost financing and business advising services.
CDC Small Business Finance helped her and her husband Octavio with questions, advised them to use investor’s money and not their own, and was able to provide the money for their needs. Unlike a regular loan, Polanco and her husband provided a list of items they needed, which included securing a forklift, office equipment and a trailer, and CDC Small Business Finance bought the equipment. The Polancos have 10 years to pay CDC Small Business Finance back.
In May, they secured a location for the grand opening of OYE Roofing, a reseller of roofing materials.
“They genuinely want you to be in business, because, again, it helps the community, and if you have potential to grow, then you can also provide jobs for the community,” Octavio said. “So that’s why it’s important that you use those resources, and they’re free.”
CDFI Friendly Fort Worth
CDFI Friendly Fort Worth was established in 2021 when the city allocated $3 million to contract with CDFI Friendly America to create a Fort Worth branch that would establish community financial institutions throughout the city.
It matches borrowers with funding available through Community Development Financial Institutions (CDFIs), or lending institutions. CDFIs are designed to promote access to capital and local economic growth in urban and rural low-income communities often underserved by traditional financial institutions. CDFIs are funded by the U.S. Department of the Treasury’s Community Development Financial Institutions Fund, or CDFI Fund, and through grant donations, fundraising, equity investments, debt instruments.
Fort Worth has been underserved by CDFIs in recent years. From 2005 through 2019 the city received $39 of funding per resident through the program, while Dallas received $71 per resident, and Texas received $109 per resident.
In 2022, the hope was for CDFI Friendly Fort Worth to be responsible for bringing in up to $250 million in financing over five years, compared to $39 million in CDFI financing in Fort Worth in the previous 15 years. Since CDFI Friendly Fort Worth began in 2022, between 200 to 250 applicants have received over $25 million in lending, according to Glenn Forbes, CDFI Friendly Fort Worth’s executive director.
The organization hopes to help underserved communities that may have been held back in the past by redlining, a practice in which financial institutions, the real estate industry and others prevented lending and development in neighborhoods with large racial and ethnic minority populations, Forbes said.
“The goal for us is providing capital and bringing additional lenders to the market to help build out these communities in a significant, positive way that they’ve not been able to do before,” Forbes said.
According to the 2022 Report on Firms Owned by People of Color: Based on 2021 Small Business Credit Survey, 35 percent of white business owners were more likely to be fully approved for business loans compared to 19 percent of Hispanic, 16 percent of Black and 15 percent of Asian business owners.
The survey states 40 percent of Black small business owners didn’t apply for financing in 2020-2021 because they believed their applications would be denied, compared to 24 percent Hispanic, 22 percent Asian and 12 percent white business owners. This hesitation is due to trust issues within the marketplace as people are financially hindered due to debt or lack a financial structure to take their business to the next level, according to Forbes.
Flexibility in lending
CDFIs don’t have lower interest rates compared to other financial institutions but provide flexibility, down payment assistance, and additional equity options to help reduce interest rates for individuals and businesses. A CDFI can be used by individuals who need quick cash or homeowners who want to upgrade their property.
There is virtually no minimum or maximum amount to borrow, providing better options than pawn shops and nontraditional loan institutions that provide short-term loans with high interest rates, which have been detrimental to minority communities, according to Forbes.
CDFI Friendly Fort Worth also works to identify national CDFIs that express interest in working in Fort Worth, matching them with individuals or stakeholders involved in development.
Derrick Walker is the owner of Smoke-A-Holics BBQ at 1417 Evans Ave. in the Historic Southside neighborhood. He opened his restaurant in August 2019, financing it with his savings and credit card. His restaurant was able to stay afloat during the COVID-19-pandemic without using the federal Paycheck Protection Program.
He knew about banks, Small Business Administration loans, and predatory lenders but was held back by his credit score and the risk associated with debt. He learned about CDFIs at a small business mixer held by CDFI Friendly Fort Worth and was able to match with TruFund, a nonprofit that offers loans to underserved small businesses and nonprofits.
He has since been able to build a relationship with a bank and now can receive a traditional loan without having to use a CDFI loan.
Walker hopes these opportunities and resources can be expanded so more business owners of color can take advantage of CDFIs. The interest rates, flexibility for those with low credit scores, and an easy application process are attractive, Walker said.
“I don’t think a lot of us know about a lot of the things that are out there,” Walker said. “So information is really key for a small business.”
From drawing national CDFIs to Fort Worth to helping small business owners in Fort Worth that work with underserved communities, CDFI Friendly Fort Worth provides opportunities for people to thrive, Forbes said.
“We want to be part of helping with true investment into these communities, not just providing information, we want to provide the capital,” Forbes said.
This story was originally published November 18, 2024 at 5:00 AM.
