American Categorical is offering $ 40 million in loans to small paint companies

Vice President Kamala Harris (C), Reign Free, Owner of Red Door Catering, Senator Alex Padilla (D-CA) and Governor of California Eleni Kounalakis (D-CA), listen to Luz Urrutia, CEO of the Accion Opportunity Fund (front left) zu) and Allison Kelly, Executive Director of Inner City Advisors (front right), during a visit to Red Door Catering, a CDFI company, in Oakland, California on April 5, 2021.

Patrick T. Fallon | AFP | Getty Images

The goal of a $ 40 million investment by American Express with the Accion Opportunity Fund is to help small businesses owned by colored people, immigrants and women recover from the Covid pandemic.

The loans granted as of this week range from $ 5,000 to $ 100,000 depending on business needs. The nonprofit fund, which aims to help build a financially inclusive world, predicts an average of around $ 28,000.

“Our intention is to examine underfunded small businesses that are genuinely looking to get stronger, reopen, stabilize and grow in 2021 and beyond,” said Luz Urrutia, CEO of the Accion Opportunity Fund CNBC. “”[Businesses] We know they are trying to invest, buy inventory, maybe pan, and they need reasonable terms and credit to get back on their feet. ”

To qualify for the 12 to 60 month loan term, an applicant must have been in business for 12 months, demonstrate revenue of $ 50,000 per year, and own at least 20% of the business. Applicants with low FICO credit scores will be considered, but their creditworthiness will be a factor in determining the interest rate on the loan, which can range from 5.99% to 25.99%.

Underfunded small business owners often use cash advances or other products from “alternative” lenders with an average interest rate of 94%, according to Accion research.

“We specialize, especially in companies that don’t have traditional documentation that doesn’t fit well in traditional credit boxes from much larger lenders like American Express,” said Urrutia, who has spent her career in lending, including 18 years with Wachovia Bank before Wells Fargo acquired it.

“FICO is a data point for us, but when a customer doesn’t have a FICO score. It’s fine. We’ll continue to lend if they meet other criteria. This requires specialized lending. Many of the mainstream traditional lenders really do Not.” have the capacity, “she said.

Black-owned companies will have an emphasis on the Accion loan program.

Last fall, American Express announced a $ 1 billion plan that included a commitment to provide capital and financial education to 250,000 black small businesses and $ 25,000 in grants to black women entrepreneurs in partnership with nonprofit IFundWomen.

“When we look at the oversized impact of the pandemic coupled with systemic racism, we know that black-owned companies have had a historical disadvantage,” American Express executive director Jessica Ling told CNBC. “This has reinvigorated American Express’ commitment to support the black business community by accessing finance, providing resources … to help them grow.”

Accion predicts that the $ 40 million investment in lending, repayment, and re-lending cycles will result in $ 125 million in loans over the next five years and enable small business owners to create 10,000 jobs or to keep.

“Our ethos is really to give a hand up, not a handout,” said Urrutia. “The sustainability and value of our model really depends on lending to companies that pay them back. We take those funds and lend them to other companies. It’s a virtuous cycle.”

Philanthropist Mackenzie Scott, ex-wife of Amazon founder Jeff Bezos, awarded Accion a $ 15 million scholarship in August.

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