A Community-Governed Fund Values Impact First

Once a business becomes a borrower, technical mentoring is provided by Uptima Entrepreneur Cooperative, including guidance on how to create business models to meet the pandemic moment. “High-quality empathetic business support is as important as the loan,” Schaffran notes. “To figure out what kind of borrowing is needed, how to manage it effectively and how to pivot if needed, entrepreneurs are going to need support.”

In the fund’s first operational year, Community Vision aims to make six loans of $50,000 to $350,000, while RUNWAY will target 18 “friends-and-family” loans of up to $50,000.

“We are like the uncle who says, ‘Okay kid, I believe in you.’” Robinson explains.

In fact, friends and family invest more in startups than any other single source, more than $60 billion a year. Some 38 percent of startup founders report receiving crucial help from friends and family. “But with the racial wealth gap, Black families often don’t have that option,” Robinson says. “They have good ideas but not the capital. That’s where RUNWAY comes in.”

That early-stage funding is life-altering, agrees Fenall, who herself received a $20,000 RUNWAY loan that included a two-year interest-only period and has now stepped up to payments of $591 a month.

At several other points in a business’s life-cycle, including expansions and unforeseen challenges, extra capital is vital. Some 29 percent of businesses failed in 2019 because they ran out of capital, according to the small business funder Fundera. The average small business bank loan amount is $633,000, while in fact, 57 percent of the small business loan applicants sought $100,000 or less. All business loans typically cost the bank the same amount to administer, so the small ones make them less money and are often less likely to be approved.

Huang, Deputy Director at the Asian Pacific Environmental Network, is deeply focused on issues of climate justice. “I never imagined I would be the board president for a loan fund,” she says. “But as we go deeper in our fight against environmental racism, we understand that climate injustice is driven by systemic economic issues. The root causes of fossil fuel extraction are the same ones driving unemployment and community displacement. So our solutions have to be just as systemic and build power for community members to govern.”

The American Express 2019 State of Women-Owned Businesses notes that Black women like Fenall own 21 percent of all women-owned businesses. But concerningly, their businesses earned only $24,000 per company on average, versus $142,900 among the larger women-owned pool.

The economic crisis triggered by the Covid-19 pandemic has put a strain on small businesses across the U.S., and Piikup is no exception. Before Covid, Fenall says Piikup was earning six figures in annual revenue for deliveries from mostly local food manufactures to retail locations throughout California’s East Bay. The business employed four drivers and one administrative worker.

As retailers closed up with Covid, Fenall dropped to one driver. Now she’s back up to a four-member team and is focused on transitioning the business into a worker-owned cooperative over the next six to eight months. Though she’s still not paying herself a consistent salary, with help from the RUNWAY loan, she was able to purchase vehicles and hire an accountant, something she celebrates. “Four years in, and for the first time, I will have number clarity,” she says.

Fenall did receive a Paycheck Protection Program (PPP) loan/grant from the government, but the full list of PPP recipients released by the Small Business Association earlier this year showed that of the 14 percent of businesses which chose to identify race in their loan application, Black-owned businesses received 1.9 percent of loans while white-owned businesses received 83 percent.

RUNWAY also deferred loan payments for Fenall and other clients for six months. “If it’s a friends-and-family loan, we need to support our clients through the hard times, and we need them to know that this is a place they can trust,” says Robinson. “This moment we are in right now is unprecedented. So let’s not use the old metrics. Let’s create a new rulebook.”