Image Source: ECDI, 2019
Key Facts
Location: Columbus and Cincinnati, Ohio
Partners: Economic and Community Development Institute (ECDI)
Summary: ECDI launched Capital for Construction to provide minority business enterprises (MBEs) with training and access to flexible and affordable short-term capital. The program works to reduce financial barriers and sustain MBE contractors’ businesses.
About
For decades, equitable participation of Minority Business Enterprises (MBEs) in the construction industry and allied fields has been a challenge. One issue is an upstart contractor’s inability to withstand any delays on payments for completed jobs. Delays in payment create a cash-flow gap—making it difficult or impossible for contractors to bid on new contracts because they do not have the necessary resources to execute if they do win the bid. For minority construction contractors, a vulnerable cohort due to historic underrepresentation in the industry, this gap is a significant barrier that inhibits their ability to sustain and grow their businesses. This instability has put many minority contractors out of business and has led to an overall reduction in the number of minority-owned contracting firms participating in the market.
The Economic and Community Development Institute (ECDI), in Columbus, Ohio, is helping address this inequity by providing bridge funding to MBEs across Ohio. To address the “cash-flow gap” and improve MBE contractors’ prospects for market sustainability, ECDI launched the Minority Business Enterprise Capital for Construction program in 2017. The Capital for Construction (CfC) program provides industry-specific business development support and capital access to small, minority-owned subcontracting firms (MBEs) in the construction industry and allied fields.
CfC provides high caliber, industry-focused training and access to flexible and affordable short-term capital. CfC short-term, low-interest loans—which range from $5,000 to $150,000—are available to Ohio MBE businesses. These loans can be used for payroll, insurance costs, vendors, subcontractors, materials, suppliers, and equipment costs. CfC participants receive one-on-one technical assistance, including loan packaging, mentorship, loan management (site visits, review of financials, e.g.), and access to industry-specific group training, like construction estimating. Upon completion of the program, participants can expand their businesses through additional long-term capitalization loans through ECDI.
The Capital for Construction (CfC) program is entering its fourth year of operations. To date, the program has served more than 350 small minority-owned construction subcontracting firms (MBEs) and disbursed more than $2,545,000 in loan capital to support the stability and growth of these firms.
ECDI developed the program incorporating industry-specific training, one-on-one technical assistance, access to markets, and access to working capital through ECDI’s Mobilization Loan, to level the playing field for MBEs and allied-industry small business owners.
The CfC program is funded in part by JPMorgan Chase, Wells Fargo, United Way of Central Ohio, and the Small Business Administration. The demand for the services and products offered through the CfC program is evidenced by high rates of participation in training events and loan applications received.
A program similar to CfC has been started in Cleveland by the Village Capital Corporation (VCC). VCC’s program is called Contractors on the Rise (COR). It was created to help under-represented populations get a foothold in the region’s construction industry. COR will be profiled at a later date, once it becomes more established.