How a Mississippi nonprofit helps Black entrepreneurs get funded

How do you start a business when you have nothing to use as collateral? In most cases, the answer is simple: you can’t – a bank won’t lend you the money. But a Mississippi-based non-profit called Higher Purpose Co. is trying to change that for black business owners in the Mississippi Delta.

In a state still reeling from the legacy of slavery and Jim Crow-era economic disparities, the organization serves more than 500 black-owned businesses — 87 percent of which are run by black women — by acting as an advocate and “race for capital.” It helps to promote. Ownership and economic justice, said Tim Lampkin, founder and CEO. Among its proposals are financial support mechanisms to reduce systemic barriers in financial institutions that have historically hindered black business development in Mississippi.

“We can help entrepreneurs get access to zero-interest loans that don’t require any collateral, and don’t require a minimum credit score,” Lampkin said in an interview with Marketplace’s David Brancaccio. “Because we know, especially when we work with black-owned businesses, collateral and credit score [requirements] There are two main issues that prevent black businesses from pursuing the capital they need.

The text below is the edited text of their conversation.

David Brancaccio: You may have participated in these – I did once [Small Business Administration] Teaching how to be an entrepreneur, and the guy on stage looks at all of us and yells, “Where are you going to get the money for your startup? And don’t tell your parents!” I mean, startup money is hard. And in your experience, what is more difficult for certain groups of people?

Tim Lampkin: totally. When we look at what we do, especially here in Mississippi with black-owned businesses, we know that there are so many barriers to access to capital. And so we’ve worked very hard over the last six years to break down some of those barriers. In the past 2 1/2 years, we have been able to deploy over $1 million in capital to Black-owned businesses in Mississippi. And so we’re really excited about that and we’re really trying to change the narrative about how access to capital is here in Mississippi, but [also] across the country.

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A “buffet of capital options” for businesses

Brancaccio: How do you make money doing this? That’s partly what courting is all about, right?

Light bulb: Therefore, we consider ourselves an investor. We have what I am describing [as] A collection of capital options, where we can really meet entrepreneurs where they are. So we have grants, we have zero-interest loans through our Kiva partner, as well as low-interest loans through community development financial institutions, and then further down the scale of the capital stack is venture capital. And so we can really offer a unique approach to this process. And by working with those entrepreneurs, we can raise grant funds that we can then re-award to the businesses, and then use the capital that different financial institutions have to actually match it with the entrepreneur.

Brancaccio: You mentioned Kiva Partners. It is a separate organization, a non-profit in itself.

Light bulb: So we are the only Kiva center in the state of Mississippi. So we can help entrepreneurs get access to zero interest loans that don’t require any collateral, that don’t require a minimum credit score, because we know, especially when we’re working with black businesses, collateral and credit score. [requirements] There are two main issues that prevent black businesses from pursuing the capital they need. And so it’s been great working with Kiva to help our entrepreneurs get access to that kind of affordable capital.

Overcoming systemic barriers

Brancaccio: Underlying all of this is that a traditional source of capital—borrowing from a bank—may have structural problems in that system, right? And do you think banks continue to use criteria that unfairly discriminate against prospective buyers who are people of color?

Light bulb: In the past 2 1/2 years, especially since the pandemic, we have seen several financial institutions get more creative with their lending criteria. And then it really started to creep into kind of traditional metrics, right? So I think the pandemic showed us that there’s a lot of flexibility in terms of repayment structure, interest rates and things like that. And even when we factor in closing costs, capital becomes more affordable. However, going back to that piece of collateral has really been a hindrance to many black-owned businesses. So we’ve actually created our own loan collateral pool that we use as a way to get collateral in place. So if someone doesn’t have collateral, we can basically reduce the risk for the borrower as well as the lending institution by guaranteeing that loan up to 50%. So if something happens to that loan, you know, it’s still a win-win situation for the financial institution. And so we’re seeing improvements in many financial institutions and how they’re working with entrepreneurs to create new products. But there’s still much work to be done in this space as we continue to use access to capital as a way to open up business ownership to many, especially here in Mississippi to black business owners. The skin is concerned.

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Brancaccio: So this financing network is one thing. Do people also provide expertise and guidance? Is it part of the network?

Light bulb: totally. Therefore, our model includes training, consulting and financing. So with the education part, we have quarterly meetings with our 500 members now across the state, and then we have monthly meetings with those entrepreneurs and bring in speakers, coaches and facilitators. And then we continue to do that one-on-one consulting with those entrepreneurs, depending on where they are in their business, and then we close that with the finance department, right? The access to capital piece so it’s a unique model within itself, and we’re creating this three-pronged approach where we’re able to meet with the entrepreneur no matter what stage they’re at in their business, because This is very vital. Because without advice, you have capital and you may not know what to do with it or you may not be able to spend it wisely. And so it’s critical that we pair that capital with mentorship and continue to provide ongoing training and support with those entrepreneurs. And you know, make sure we’re with them every step of the way.

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Brancaccio: I have a brain drain question, Mr. Lampkin. You’re from Mississippi, I see. And you probably had options, but you chose to serve your country and not move to a place where the money is big.

Light bulb: totally. So I believe in purpose. And I truly understand that this is what I am called to do at this particular time and in this particular place. I think what’s often happened is that, especially when we look at millennials, when we look at different opportunities in bigger cities and things like that, it can definitely be more profitable because it’s about money and finances. And all those material things are related. And at the same time, does it really satisfy you as a person? And so I get the chance to do amazing things. I get paid to do that too [as] See the direct impact in my community. And it’s really about leaving a legacy. And so I encourage anyone listening who is on the fence about how to get involved or stay involved with your city or your community, there are ways you can do that, there are ways That you can find a problem and then be part of the solution. And that’s what I did by building The Perfect Target Company.

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