Today we welcome Teresa Morrow, vice president of external relations and marketing at The Minneapolis Foundation, to share how the foundation’s Working Capital Loan Fund, a $1.5 million Program Related Investment (PRI), is helping minority businesses get into the game of building the new Vikings stadium.
In late 2012, a Minnesota legislative appropriation and the investment of the Vikings football organization launched plans for a billion dollar sports facility in Minneapolis. Many supporters of the new stadium project heavily promoted the economic activity that would result from the construction of this new facility.
Access to Working Capital is Large Barrier
However, without intentional efforts to level the playing field in terms of access to financing, the stadium will not be the inclusive project that the Legislature envisioned. The goal of The Minneapolis Foundation’s Working Capital Loan Fund is to eliminate the single largest barrier to the inclusion of Minority Business Enterprise (MBE) contractors in this project: access to working capital.
Due to shorter business histories, narrower asset bases and limited access to conventional financing, the only sources of working capital for MBEs are expensive ones. Providing working capital at a more reasonable cost to these MBEs leverages the stadium’s benefit to the entire community by developing long term quality employers, new skills, and capacity—not only for the MBE but also for its employees.
The Working Capital Loan Fund
The Working Capital Loan Fund is a $1 million, 3-year Program Related Investment of The Minneapolis Foundation. The investment is a loan to Meda (Metropolitan Economic Development Association), which is an experienced Community Development Financial Institution. The fund takes a ‘reuse and recycle approach’ with 75% of the fund deployed at any given time. These funds are expected to revolve four times annually, providing up to $12 million in short-term loans to participating MBEs.
Enthusiastic Donor Response!
Donors to The Minneapolis Foundation were invited to participate in this PRI by investing a limited share of capital from their Donor Advised Funds, resulting in a loan pool of $500,000. The Minneapolis Foundation matched the Donor Advised Fund investments to create the $1 million PRI. The Foundation (and the Donor Advised Funds) will earn a modest annual return, and at the end of three years the principal will be returned by Meda.
The response on the part of donors was enthusiastic, with full funding provided in just a matter of weeks. While the support of donors has been gratifying, the interest by potential borrowers is equally satisfying. Small business owners are now receiving tools that will truly help them ‘get in the game!’
Related: For more on the topic, see Mission Investing Gaining Minnesota Momentum, a post by Wendy Wehr, MCF’s vice president of communications and information services.
Photo cc MoDOT
This post was updated with additional information from The Minneapolis Foundation clarifying its PRI.