The Motor City Contractor Fund pilot program leaders are all smiles after announcing the launch of their program, which will remove barriers for and provide 20 Detroit-based contractors with a suite of services to grow their capacity and succeed in the increasingly competitive local marketplace.
Photo courtesy of ROCKET MEDIA
The Rocket Community Fund, Community Reinvestment Fund, USA (CRF), Invest Detroit and Barton Malow Builders today announced the launch of the Motor City Contractor Fund pilot program, which will remove barriers for and provide 20 Detroit-based contractors with a suite of services to grow their capacity and succeed in the increasingly competitive local marketplace.
The $10 million pilot program will provide lending, technology and business advisory services and community-based partnerships to meet the cash flow and business needs of participating contractors. With demand for rehab, repair and new construction consistently growing, this partnership aims to equip Detroit-based contractors with the necessary tools to support business growth and position themselves to compete for an array of contracts, including rehab, home repair, new construction, demolition and other public/private projects.
By supporting contractor growth, this program also focuses on increasing access to jobs for Detroit residents.
“Development continues to exponentially increase across our city, which will catalyze economic impact, and it is critical that Detroit-based contractors are well positioned to be a part of that growth,” said Laura Grannemann, Vice President of the Rocket Community Fund, which is investing the first $1 million into the program’s administration and operations.
“Detroit-based contractors have historically been overlooked, but the Motor City Contractor Fund will increase access to financing for local contractors, empowering them to grow their business and create more jobs for Detroiters.”
Solving for historic inequity Small contractor companies in Detroit, primarily run by entrepreneurs of color, have been unable to compete with larger and non-minority owned contractors due to several reasons – among the most significant, is access to financing.
Many smaller, minority-owned firms have historically been turned away by traditional lending institutions due to institutional racism and perceived risk as a result of the cyclical nature of the industry. Research consistently shows that they are often forced to endure higher interest rates on the loans they do receive which stimies their ability to grow and succeed.
Minority-owned firms also receive smaller equity investments than non-minority firms and have less wealth to invest in their own business. Minority-owned firms invest less than $30,000 on average after the first year of operation, compared to $45,000 for non-minority businesses. Additionally, small and minority-owned contractors often lack the digital presence and resources required to competitively advertise, bid and successfully complete projects. By combining flexible lending with business advisory services, partnerships, and technical assistance, the Motor City Contractor Fund pilot program can more easily meet the business needs of participating contractors.
“Detroit is seeing its largest construction boom in more than a half century and that means there should be greater opportunity for our city’s smaller and minority owned construction contractors,” said Detroit Mayor Mike Duggan. “Unfortunately, for reasons that go back generations, they have multiple barriers to that work. Thanks to the generosity of the Rocket Community Fund and its partners, the Motor City Contractor Fund will begin to open the doors of opportunity to more of these small companies so they, too, can take part in the rebuilding of our city.”
“Today’s announcement of the creation of Motor City Contractor Fund with an initial $10 million investment has the potential to be transformational for so many Detroit-based contractors who have historically been locked out of development opportunities due to the lack of access to capital and the infrastructure and expertise to properly bid on projects. I look forward to working with the Rocket Community Fund and all the other partners to implement this amazing initiative,” stated Detroit City Council President Mary Sheffield.
Financing The structure of this pilot launch of the Motor City Contractor Fund was informed by a working group of local experts, including contractors. This initial launch will prove out the model of the program and showcase the incredible demand for financing among local contractors. Post-launch, the co-host organizations will collectively engage other business, philanthropic, and nonprofit leaders to support this critical endeavor.
CRF, a nonprofit that works to create a just economy for all by co-creating innovating financial solutions, is serving as the lead arranger of the Motor City Contractor Fund pilot program. CRF will manage the pilot, coordinate the pilot’s financial product, lead pilot structuring, coordinate loan agreements to provide capital for the pilot, manage the Motor City Contractor Fund pilot website, facilitate job providers and engage partners.
“Financing is the single largest barrier to entry for contractors, and contractors of color are often only able to access high-interest financing or no financing at all,” said Krysta Pate, Vice President of Economic and Social Justice for Community Reinvestment Fund, USA. “By providing the critical low-interest loans for working capital, the pilot program for the Motor City Contractor Fund enables participants to have equitable access to financing and to the opportunities it affords.”
During the first phase of the program, CRF will carry $8 million on their balance sheet to ensure the first cohort’s participants have access to critical financing. Working capital expenses typically include upfront payroll expenses, costs of goods, materials, rent, equipment rental, accounts payable and more. The Motor City Contractor Fund pilot will make flexible, low-interest loans to address these pressing capital needs of participating contractors with 12-month terms that are renewable annually.
All loans associated with the Motor City Contractor Fund pilot program are subject to credit approval and meeting eligibility criteria. Each participating contractor will also receive a grant of $5,000, to be used in accordance with its customized business growth strategies on expenditures like credit repair, bonding capacity, developing an online presence and capabilities statements and more.
Invest Detroit, a Community Developmental Financial Institution (CDFI), will support CRF and serve as a loan originator for the Motor City Contractor Fund pilot program. Invest Detroit is a mission-driven lender and investor that supports business and real estate projects that will ignite economic growth in Detroit. It works to strengthen Detroit neighborhoods, increase density, grow job opportunities and support inclusivity.
“Detroit-based projects deserve Detroit-based contractors and a Detroit-based workforce, ensuring that we are able to grow and preserve wealth in the Motor City,” said Jason Barnett, Senior Vice President of Lending for Invest Detroit. “The Motor City Contractor Fund allows us to deploy dollars to our friends and neighbors who are building Detroit’s next chapter.”
The Detroit Development Fund, Opportunity Resource Fund and CDC Finance will serve as the additional CDFI loan originators for the Motor City Contractor Fund pilot program.
Technological and Business Advisory Support Contractors will be placed into one of three technical assistance curriculum categories:
Fast Track, Fortified Track and Foundation Track.
• Fast Track includes emerging contractors that have projects in queue, meet most funding requirements and are ready to apply for funding.
• Fortified Track includes emerging contractors that have potential projects in queue, meet many funding requirements and are not immediately ready to apply for funding.
• Foundation Track includes any contractors without a pipeline of potential projects, or that do not yet meet funding requirements.
“Now, more than ever, contractors are expected to be an expert in topics ranging from building standards to social media management and everything in-between,” said Dr. Nicole Parker, Executive Director of LifeLine Global Consulting. “By utilizing a holistic approach to training contractors, we can ensure that Motor City Contractor Fund participants are empowered with the knowledge and resources they need to thrive in the current landscape.”
A wide variety of training will be provided for everything from legal aspects of construction, pitch presentation, proposal development, safety training, social media, succession planning, suppliers and more.
Metro Detroit-based commercial construction firm Barton Malow is working closely with LifeLine Global Consulting to provide many of the training modules, as well as ongoing mentorship and business advisory support to Motor City Contractor Fund pilot program participants.
“We’re proud to do our part to help fill the gap of Detroit-based contractors, so that they may be part of the unprecedented development we’re seeing across the city,” said Dannis Mitchell, Director of Community Engagement for Barton Malow. “We look forward to working with the Motor City Contractor Fund participants throughout their cohort, as well as alongside them on future projects across Detroit.”
Past Barton Malow projects in Detroit include the Shinola Hotel, Little Caesars Arena, DPSCD Randolph Vocational Center and Marygrove P-20 Initiative. Barton Malow is also construction manager for the Hudson’s Site Development Project.
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