A 2015 Gallup study commissioned by banking powerhouse Wells Fargo confirmed much of what Jim Reiff already knew: Minority-owned small businesses face credit problems at a higher rate than average, and black business owners are less likely to reapply for business credit once they’ve been turned down, among other findings.
As executive director of the Nebraska Enterprise Fund, Reiff wanted to seize an opportunity to leverage San Francisco-based Wells’ response to those findings, particularly a slice of the bank’s commitment to lend out $50 million and make available $25 million worth of grants targeting diverse small businesses.
Turns out, third time’s the charm.
After trying and failing to secure capital in either of the first two award cycles, the Nebraska Enterprise Fund in June locked in $500,000 worth of lending capital and $195,000 worth of grants from Wells Fargo.
“Some people say we’re competing with banks,” Reiff said. “We’re not. We’re augmenting what they do.”
As a community development financial institution, or CDFI, the Nebraska Enterprise Fund is one of many organizations that have stepped up since the recession to fulfill relatively smaller-dollar financing needs of small businesses, particularly those in low-income or underserved communities.
In some cases, businesses trying to get up and running need so little financing that traditional lenders like banks won’t even consider making a loan. In other cases, startup business owners lack the required credit history to justify a bank’s decision to make a loan.
That’s where CDFIs come in.
“I spent 40 years in banking ... and we all work in a box,” said Andrew Williams, chair of the Nebraska Enterprise Fund board of directors. “If it doesn’t fit a perfect mold, banks can’t always do it.”
One recent endeavor supported by NEF financing is the Fair Deal Cafe, which opened in November 2016 at 2118 N. 24th St., in a commercial development owned by the Omaha Economic Development Corp. situated on top of the restaurant’s previous home.
Reiff said the business owner didn’t qualify for bank financing for a $25,000 loan. The owner wanted to reopen the cafe once known as “Black City Hall” because of its favor by prominent black city leaders and politicians from the 1940s to the 1970s. So the Nebraska Enterprise Fund stepped up.
But all this doesn’t mean that banks are completely out of the small-business financing equation.
“If people perceive this as competition, then they don’t get it. We’re using our resources to help (CDFIs) get to an underserved market,” said Kirk Kellner, Wells Fargo’s top local executive. “We want businesses to know what options are out there.”
And Wells Fargo, which has more deposits in the Omaha market than any other out-of-state bank, isn’t the only financial institution supporting the Nebraska Enterprise Fund.
First National Bank of Omaha, Mutual of Omaha Bank, Great Western Bank, Bank of the West and US Bank also contribute funding to the Oakland, Nebraska-based organization.
Other supporters include the Peter Kiewit Foundation, the Sherwood Foundation and the Omaha Community Foundation.
Reiff said the ideal outcome for businesses his organization supports is that they eventually grow to the level that they show up on banks’ radars.
“They need traditional bank relationships; otherwise, they’re not succeeding,” he said.