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Sponsored by: Common Future’s character-based lending model was designed in response to structural patterns of racism in traditional capital systems.
Editor’s Note: This sponsored content is Cultural Innovation Center (CCI) as part of the AmbitioUS initiative. This series explores how alternative economic models can empower artists and cultural bearers, with a view to economic freedom and long-term sustainability.
Sabrina Jones found inspiration for her skincare line. SJC body love, pregnant. The Minneapolis-based mother-to-be wanted a healthier, greener solution, so she began researching Essentials her oils and coming up with formulas for her own use. At the time, she was working as a company employee, but she launched a small product line as her side business in 2015.
“I started to notice that the business was growing,” says Jones. She didn’t feel ready to grow up. “It was really a hobby, so I had to learn a lot of things that I didn’t expect.
That led her to a conference hosted by an organization called ConnectUP is focused on connecting black women entrepreneurs to investors, offering a wide range of wraparound services and other resources within the business ecosystem to enhance relationships and opportunities for success. Jones built a website, employed three employees, and was able to access funding through a “character-based” lending program that went beyond applicants’ credit scores and existing collateral.
The financing program Community Credit Lab and Common Future are two nonprofits focused on equitable access for diverse entrepreneurs in an effort to bridge the racial wealth gap. The organizations, which recently announced a merger, raised $800,000 to provide character-based loans through his three partner organizations, ConnectUP, Native Women Lead, and MORTAR.
Eric Horvath, Director of Capital Strategy at Common Future, said: “I think a lot of the way we approach things, through co-design and partnerships, adopts an inclusive and unbiased lens in how we build things.”
Character-based lending initiatives are very different from most lending programs. This model was designed in response to the structural patterns of racism manifested in traditional capital systems. Rather than algorithmically processing entrepreneurial data, Common Future empowers community organizations to identify loan recipients and determine how much they really need.
“Our theme was to be the people with the longest established relationships in the entrepreneurial ecosystem and community,” says Horvath. “They will know best who can invest and who can be trusted.”
According to ConnectUP Chief Enterprise Officer Ixchel McKinnie, they start by matching entrepreneurs with business consultants. “They have been working with them for 60 days and are preparing to receive the capital,” he says.
Common Future gave the organization control over the funds, but the organization did all the fundraising.
ConnectUP CEO and Founder Y. Elaine Rasmussen said: “It was really great to have that collaboration in that partnership.”
In its first round of funding, ConnectUP gave $200,000 to five Black women-owned businesses. Their primary focus is second-stage startups that are more than two years old, although the business does not have to be profitable. I also want to make sure the business owner is paying for herself and plans to hire at least one of her employees.
“We feel we can make a difference in that our capital is making a difference in our communities,” McKinnie says. “So we are starting to build wealth and financial security there.”
They also don’t fund tech companies or participate in the venture capital space.
“There’s nothing wrong with high-risk, high-return tech and biotech companies. They have their place,” McKinney says. “Also, to make the impact that we say we want, especially in the post-George Floyd BIPOC community, we really need money for these businesses that will continue to add employees and remain. We have to make sure, invest in the community, invest in the community.”
After the first successful trial, Common Future and Community Credit Lab plan to continue the project with more infrastructure as one company.
For Jones, the money had a big impact. She hired some staff to help run her business and was able to hire her web developer to bring her online presence to life. She is also in talks with several major retailers thanks to her Diversity of Suppliers conference, where Common Future has brought her together.
“[Common Future] We’ve invested heavily in mentoring and resources, not just funding, but educating them to survive it all,” says Jones.
Nia Springer-Norris is a Chicago-based solutions and culture journalist who writes for Next City and Kirkus Reviews. Her work has also appeared on Ms., Romper and Parents.com.
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