Last month Northeastern University announced it was committing $2.5 million in seed funding for a newly created “Impact Lending” program, offered in conjunction with LISC Boston. The seed money will capitalize a $6.5 million revolving loan fund (RLF), and the RLF will enable LISC to provide $1,000 to $1 million loans to women- and minority-owned small businesses located in or around Northeastern University. The private university is located in Boston’s Roxbury neighborhood—an inner city community that struggles to overcome persistently high rates of poverty.
Mirroring national trends, small business lending in Boston remains significantly lower at $491 million in 2014, compared to the pre-recession $605 million in 2007. The biggest decline has been in microloans. In 2014, there were 14,000 fewer microloans to Boston small businesses than there were in 2007, representing a 43% decline in total loan volume.
Northeastern and LISC’s Impact Lending program aims to address this issue. In addition to underwriting these loans, LISC will provide businesses with the technical assistance they need to compete for larger contracts with the university. By combining direct loans with business advisory services the initiative hopes to serve 85 small businesses and create 330 jobs over the next two years alone. The partnership stands out for its hyper-local business focus and its provision of wraparound services that ensure their long-term success.
Northeastern Senior Vice President and General Council Ralph Martin explains, “If we can give them the opportunity through this loan fund with LISC to get capital, grow their businesses and expand their capabilities [In the] long-term, that’s going to have more impact than any donated or charitable effort that we could have.”
As ICIC research shows, small businesses in low-income, majority-minority areas are less likely to receive traditional bank loans; and inner city business owners rely more heavily on personal credit, friends and family for capital than their peers outside of the urban core. “Not everyone has benefitted equally from the recent economic upturn,” said Bob Van Meter, LISC Boston executive director. “Our goal is to connect small businesses from low-income neighborhoods with the broader regional economy. In building up their capacity, local businesses will be able to take advantage of opportunities for business growth that were previously unavailable to them.”
The loans can be used for a variety of business needs, including hiring new staff, purchasing new equipment or inventory, building renovations and/or tenant improvements, real estate purchases and business debt refinancing. It will offer flexible, below-market rates (0% to 7%) and terms to meet the needs of small businesses that might not otherwise qualify for traditional bank financing.
The Impact Lending program is now accepting applications. To learn more and apply, visit: https://www.northeastern.edu/impact-lending/