Lessons from Impact Lending in Boston
Small businesses in Boston add immense value to their communities. They bring jobs and economic growth, while contributing to a unique sense of place. Boston’s institutions of higher learning also have a significant economic impact on their surrounding communities and the local economy: The 10 largest colleges and universities in the Boston area spend a combined $900 million each year on good and services from vendors.
Boston-area small businesses however, especially those that are minority and women-owned, often do not have access to the resources they need to grow and sustain their businesses. As a consequence, they are not well-positioned to compete for university contracts, either because they lack connections to vending opportunities or because they lack the capacity to deliver at the necessary scale. LISC Small Business and Northeastern University set out to level the playing field, teaming up to create the “Impact Lending” program, a collaborative of socially conscious lenders that provides access to financing for small businesses, particularly women- and minority-owned enterprises, as well as technical assistance and connections to the university’s procurement activity. These businesses, many of which do not qualify for traditional financing, can access Impact Lending loans ranging from $1,000 to $1 million to meet a variety of capital needs.
As a new LISC Boston report on the program reveals, Impact Lending successfully helped several diverse entrepreneurs to grow their small businesses and access procurement contracts. The program also helped Northeastern University diversify its supplier base. In addition, the businesses financed through the program, several of which are profiled in the report, had relatively low rates of default, demonstrating the value – and the viability – of investing in this sector.
The report also describes a few challenges the lending program encountered and discusses some lessons learned. Among them, fledgling businesses need more than financial capital; they also need technical support at earlier stages to position their businesses to be stable, sustainable and capital-ready.
See LISC Small Business for more on how LISC supports entrepreneurship in communities of opportunity with loans and technical support.