When Patient Capital Requires–And Benefits From–Patience With Government

Mountain Bizworks

Asheville, NC

The Practice

Mountain BizWorks (MBW) is a CDFI that provides business loans and coaching to small businesses in Western North Carolina. MBW has a particular focus on businesses that are often unable to access financing from banks and other traditional sources, especially low-income, minority, women, and immigrant entrepreneurs. MBW pairs its small business loans — ranging from $1,000 to $250,000 — with highly customized, peer-to-peer business coaching by successful local business owners.

But even as a CDFI, Mountain BizWorks still must adhere to underwriting requirements in its lending. “What that means is that there are still business owners in the community that we want to be able to lend to, but who don’t quite meet our requirements. Some, for instance, might not have sufficient collateral to secure the loan they need.” says, Moriah Heaney, MBW’s community investments manager.

So the City of Asheville and Buncombe County stepped in to help MBW, along
with two other local CDFIs, to make more loans to lower-wealth borrowers and entrepreneurs of color, who tend to suffer the most by having insufficient collateral, regardless of promising business ideas. The city and county came together to create the Mountain Community Capital Fund, a loan guarantee fund that protects lenders against default on 85 percent of higher-risk loans (up to $75,000) to business owners with less collateral. A modest fee of one percent of the loan amount is charged to the borrower to cover administrative costs associated with maintaining the guarantee fund.

“As a CDFI we constantly have to balance community impact and asset quality with our portfolio, to ensure we can continue to make a meaningful impact over a sustained period of time,” Heaney says. “This is why the Mountain Community Capital Fund is such a game-changer because it allows us to significantly increase the amount of impact we are able to have in low-wealth communities of color while remaining fiscally prudent.” Since the fund launched in August 2019, MBW alone has closed four loans to business owners that otherwise would have gone wanting. Six months into the guarantee fund’s availability, that’s already 2.5 percent of MBW’s loan portfolio.

What caught UMA’s attention was not the credit enhancement tool, per se, but the fact that it was a collaboration among several community lenders and government. In this case, the public sector wanted to advance a policy goal of improving equity in small business lending. They are contributing the capital to the guarantee fund while partnering with the organizations — local CDFIs — best positioned to mobilize it in lower-wealth communities and among business owners of color. UMA aims to use our Communities of Practice to seed this thinking among partners across the country and begin putting capital to work in communities more equitably. It took almost three years to pull the Mountain Community Capital Fund together; working with government sometimes means things take longer as things wend their way through approval processes. But now that fund is in place, it should be a model for how CDFIs and local governments in other areas can replicate it.

The Practitioners

Kareen Boncales and Moriah Heaney

Mountain Bizworks

Kareen Boncales and Moriah Heaney drive some of Mountain BizWorks’ main support programs for entrepreneurs in Western North Carolina.

Both say it was their interest in entrepreneurship abroad that helped them realize how much work still had to be done back in the U.S.

Boncales was born and raised in the Philippines and moved to the United States when she was eight-years-old. After college, she joined the PeaceCorps and was sent to Cameroon, where she helped budding entrepreneurs access business skills — a no-coincidence similarity to her current role as Mountain BizWorks’ learning services specialist.

As for Heaney, she comes from a family that’s long been deeply steeped in microfinance. Her mom traveled throughout the world to study community investment models before landing executive jobs at USAID and the Calvert Foundation. Heaney later did internships in Kenya and Bangladesh, but realized that she could have the biggest impact back home.

“I started to think about how uncomfortable I was with the sense of importing Western values into non-Western countries,” said Heaney, Mountain BizWorks’ community investments manager. “It felt somewhat imperialist to me, and I was recognizing that there was still a lot of poverty in the United States.”

Now the two are part of UMA’s Pathways to Patient Capital program, where they’re working to widen the impact of their manufacturing-related programs while sharing their experiences with local creatives.

With a large presence of food producers, craft workers, and outdoor gear manufacturers, Western North Carolina is bustling with fabrication activity. In 2019, manufacturing businesses made up 20 percent of Mountain BizWork’s loan portfolio (up from 14 percent between 2013 and 2019).

Craft Your Commerce is the main program they have on deck targeted towards that audience. It features lectures, six-week business training courses, one-on-one mentorship, and financial training.

“Asheville and Western North Carolina as a whole have a deep history in manufacturing, whether it be specialized craft or legacy manufacturing, like textiles and furniture,” said Heaney. “Our current barrier at this time is finding best practices in outreach and program development that will make our craft business trainings more interesting, valuable, and attended by the makers of color in our community.”

Despite wanting to expand their audience, Boncales says they’re content with the positive transformation they’ve brought to existing customers. “From the time they first come in and get connected with us, we get to see them coming with their dreams and ideas, and how they make their dreams into reality. As cheesy as it sounds, it’s true,” she said.

UMA has assembled our Pathways to Patient Capital practitioner cohort because each member has found a successful or promising approach to helping entrepreneurs of color — including makers and manufacturers — to get access to the capital and know-how they need to realize their business ideas and plans at scale. We know there is great benefit in lifting up and sharing this information among other practitioners, but also with other audiences, such as policymakers, lenders, and other funders. We compiled the brief profiles you are about to read to give these audiences a sense of both the personal and the practical: one section describes the people and organizations doing this work and the inspiration that guides them (“The Practitioner”); the other describes the innovations in capital access or readiness that each is pioneering or bringing to scale (“The Practice”). You can read the full report here.