With Focus at the Institution, Anchors Can Drive Significant Business to Small Vendors

LISC Boston

Boston, MA

The Practice

In 2016, recognizing its leadership role as an anchor institution with the power to provide significant support to Boston’s neighborhood economies, Northeastern University (NEU) set out to cultivate a diverse slate of minority- and women- owned small businesses as vendors for its tens of millions of dollars in annual procurement spending.

NEU partnered with LISC Boston to create a suite of loan products designed to provide a lending ladder to help small businesses come up the curve to institutional procurement, including: contract loans to help businesses who won a contract develop a reserve of working capital as advances of the anticipated invoice amounts; traditionally structured term loans to help finance growth over a five- to ten-year horizon; microloans of smaller amounts using and shorter terms; and, in partnership with Kiva, character-based loans, that served aspiring vendors. Lending capital and administration costs for these tools was provided by a $2.5 million contribution from NEU.

The lending program’s most successful component was the character-based loans: they were highly accessible for businesses needing very small amounts of capital. Topping out at $10,000, they were uncollateralized, interest-free, and charged no fees. The loans were 50 percent crowd-funded with the other 50 percent being matched by a $100,000 Impact Lending commitment from NEU. A number of local partners acted as Kiva “Trustees,” which are community members or organizations who add credibility to a borrower by vouching for their character, business, and social impact — and who provide a further layer of support and assistance to these smallest business borrowers.

Karleen Porcena, who led the business outreach effort for LISC Boston, says it’s important to tell the story of how small loans can be some of the most impactful for businesses as they get their foot in the door with larger customers, such as anchor institutions. Food-related businesses were some of the best-represented among these loans and, overall, one-third of the 30 or so recipients were makers or manufacturers.

As other anchor institutions look to replicate a similar program, Porcena
says they will benefit from identifying a champion at the institution who can work with procurement offices to proactively create purchasing opportunities geared toward small businesses. “It’s a different mindset than most anchor procurement operations are used to,” she says. “These are professionals who are generally expected to maximize volume and minimize costs. Those important efforts sometimes run counter to what is needed for smaller vendors to find a right-sized opportunity for them to get a first contract and establish a successful relationship with the institution. It takes a bit of time—and strong institutional champions to reinforce it—to help them think about ways to create value in the community that are also in alignment with the institution’s goals.”

The Practitioner

Karleen Porcena

LISC Boston

Karleen Porcena’s past plays a major role in her work today.

She started her career overseeing direct services — everything from food security assistance to programs targeted at seniors — at Action for Boston Community Development (ABCD), at the Mattapan Family Service Center, Boston’s largest anti-poverty agency. Her clients were low- to moderate-income individuals whose stories reminded her of her youth growing up in the city’s public housing system with immigrant parents.

“I felt like I shared so many of the stories of the people that I worked with,” said Porcena.

Throughout her ten years at Mattapan, Porcena found the work “extremely fulfilling,” but she was discouraged when she saw repeat clients who didn’t seem to be gaining more economic mobility. “Services were important, but equally important is to work on systems strategies that were more big picture,” she said.

Supporting entrepreneurial aspirations, she realized, was one way she could prop up “big picture” strategies around creating and sustaining wealth at the neighborhood level.

“I think a lot of times with low-income people we just think, ‘How can we fix folks?’” said Porcena. During her time working on small business development at LISC Boston, she said their approach was to “take what they [clients] already knew and do well and advance that.”

“It was an avenue where people had more autonomy over the trajectory of their lives,” she said.

She recalls one company, Sweet Teez Bakery, that received financial help to fulfill a big Whole Foods contract in a short period of time. That could have been a steep challenge without LISC Boston. “The owner was early on in her baking career so she basically had to put layers of different financing together to get the right amount of funds,” remembers Porcena. “Boston LISC helped provide that for her.”

Today Porcena works as a banker at Berkshire Bank, a regional financial
services company where she supports entrepreneurs in the Roxbury neighborhood and coordinates a capital fund aimed at businesses without networks of wealthy friends and family. That fund, aptly titled
the Friends and Family Fund, is being coordinated in part by the Runway Project, an organization that launched a similar seed fund for entrepreneurs of color in Oakland.

It’s all part of a career path that Porcena says has “made me see the power, strength, and value in the people I was working with who we categorize as low- income individuals.”

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.