Breaking The Cycle Of Disinvestment In Lower-Income Communities
Project Reo Collective is a coffee shop in San Diego’s Paradise Hills neighborhood that had trouble getting a bank loan to expand after a year of operation.
Claire Trageser/KPBS
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Claire Trageser/KPBS
It’s not uncommon for people who want to start businesses in lower-income neighborhoods to have trouble getting bank loans. But increasingly, there are investors looking specifically to help businesses in those areas, with the aim of reversing the cycle of disinvestment.
“There’s always reasons to say no to a borrower. We are looking for reasons to say yes,” says Lauren Grattan, a founder of the San Diego-based investment company Mission Driven Finance. She explained that her company doesn’t look at personal credit scores. “We instead look at the validity of the business and how well can you repay from the business earnings.”
Her company’s goal is to fill the gap between more traditional profit-motivated investing and philanthropy that focuses on economic development.
One business that could have used help like this is Project Reo Collective, a coffee shop in Paradise Hills, a lower-income neighborhood of San Diego.
The coffee shop is situated in a small strip mall near a Mexican restaurant and a cell phone store. On most days, the cafe is filled with people working on laptops or hanging out while drinking Mexican mochas or lavender lemonades.
Two specialties of the Project Reo Collective coffee shop are its lavender lemonade and Mexican mocha.
Claire Trageser/KPBS
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Claire Trageser/KPBS
“Project Reo Collective started out as five families who got together … cleaning up the neighborhood here,” says Tommy Walker, one of the owners. “A lot of people in the neighborhood said, ‘We wish we had somewhere to hang out, somewhere we grab a cup of coffee, meet our neighbors, do some homework or study.’ “
Walker says that after a successful first year, he went to a bank asking to borrow $4,000 for an espresso machine. But, he didn’t have any luck.
“They said, ‘No, you guys don’t qualify because you haven’t been around long enough,’ ” he says.
A problem of disinvestment
Having trouble getting a small-business loan like this is typical, according to data compiled by the nonprofit Woodstock Institute in a report titled “Patterns of Disparity.” It shows that between 2012 and 2016, only about one in five businesses in low-income areas across the United States received bank loans or even business credit cards. That’s compared with almost three in five businesses in higher-income areas.
“You have a cycle that kind of perpetuates that neighborhood being less friendly to business,” says Spencer Cowan, the researcher who compiled the data. “Businesses don’t get started. So employment stays depressed. The job opportunities aren’t there in the neighborhood. Businesses that are there don’t expand.”
He says it can also drive businesses to predatory lending.
That’s what happened to Natalie Gill. After running her flower-arranging business out of her home, she wanted to expand to a flower shop and cafe called Native Poppy.
“I had two years of experience with profit, but I got rejected for every loan I tried for,” she says.
A normal small-business loan has 5 to 10 percent interest, but she took a loan from an online company. “It was at 18 percent interest, and I had to pay it within three years, which was a risk I was willing to take because I had no other options,” she says.
Bank investment vs. community investment
Banks are restricted in whom they can choose for loans, says Carty Davis, an investment banker with C Squared Advisors.
“A bank can’t just say, ‘I really like this person. I’m going to take a flier on them because I know they’re going to be successful,’ ” he says. “They have a good business plan, but if they don’t have equity to put into the deal or cash to put into the deal, it’s going to be very difficult to get a loan approved.”
Davis says banks have certain criteria that must be met, such as a good credit history. He suggests that if potential borrowers don’t have that, they can go to the federal Small Business Administration.
But here’s the issue for lower-income communities: Those loans still require big cash down payments or home equity, which business owners may not have.
There are alternative ways of getting financing, such as from a company like Mission Driven Finance. In addition to investing in small community businesses, Mission Driven Finance also helps people looking for small-business loans better understand the technicalities of borrowing money to open or expand businesses.
The point, founder Lauren Grattan says, is to invest in neighborhoods that really need it. Because when businesses succeed, they hire locally and the entire community reaps the benefits.
‘We Don’t Have Enough Women In Power’: Notre Dame Coach Muffet McGraw Goes Viral
Comments about sexism by head coach Muffet McGraw of the Notre Dame Fighting Irish went viral this week.
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Muffet McGraw, the two-time championship-winning head coach of women’s basketball at the University of Notre Dame, was dancing a jig and celebrating Friday night after leading her team to victory over the University of Connecticut.
The NCAA women’s basketball championship game is now set for Sunday — setting up a possible third win for McGraw — with the reigning national champion Notre Dame’s Fighting Irish taking on No. 1 seed the Lady Bears of Baylor University.
But this past Thursday, McGraw’s mood was more serious when answering a question about her recently reported commitment to never hire another male coach for her staff.
She began talking about the decades that the Equal Rights Amendment has gone without ratification: “We need 38 states to agree that discrimination on the basis of sex is unconstitutional. We’ve had a record number of women running for office and winning. And still, we have 23 percent of the House and 25 percent of the Senate.”
Muffet McGraw: A voice for women.
A voice for women in sports. #WFinalFour | @ndwbb pic.twitter.com/sxsQE3Mt4i
— NCAA WBB (@ncaawbb) April 4, 2019
McGraw was responding to a question about being the “voice” of female coaches in college athletics after University of Tennessee coach Pat Summitt, who won 1,098 games with the Lady Volunteers for more than 38 years, died in 2016.
McGraw’s two-minute response, touching on the long history of sexism in many American institutions, went viral.
“I’m getting tired of the novelty of … the first female governor of this state. The first female African-American mayor of this city,” she said. “When is it going to become the norm instead of the exception? How are these young women looking up and seeing someone that looks like them, preparing them for the future? We don’t have enough female role models. We don’t have enough visible women leaders. We don’t have enough women in power.”
She said girls are socialized to think “men run the world.” Where better to counter that narrative than in sports, she asked.
“When you look at men’s basketball and 99 percent of the jobs go to men, why shouldn’t 100 or 99 percent of the jobs in women’s basketball go to women? Maybe it’s because we only have 10 percent women athletic directors in Division I. People hire people who look like them. And that’s the problem.”
In 1972, Title IX enacted gender equity policies in student athletics as part of a law. Two years later, more than 90 percent of women’s teams in college sports had female coaches, according to the Tucker Center for Research on Girls & Women in Sport at the University of Minnesota.
That number has fallen drastically. The center’s newest report based on data from last year found the percentage of female head coaches had increased slightly from previous years, but only to 41.8 percent. The group took data from 86 institutions that were part of the NCAA Division I “big time” conferences.
In basketball specifically, the percent of women coaching women was 59.3 in 2018.
Notre Dame player Jessica Shepard responded to McGraw, “Talk that talk then coach.” Notre Dame forward Brianna Turner, who scored her 2,000th career point Friday, just wrote on Twitter: “Take notes.”
Samantha Brunelle, a high-profile incoming recruit to Notre Dame, tweeted the video of McGraw’s answer, saying it was “one of the many reasons why Notre Dame was the place for me.”
“I aspire to be like her one day,” Brunelle told the South Bend Tribune of South Bend, Ind. “She stands for women so much. She has a huge voice to help give us women more of a platform.”
