Since the onslaught of COVID-19 in mid-March, LISC has raised and is investing nearly $200 million to support small businesses run by people of color and women all across the country. This unprecedented effort to help buoy entrepreneurs who are vital to their communities and the economy as a whole has demanded we create new systems that center racial and economic equity at the heart of our investments.
When COVID-19 arrived in Chicago, Orlando Burns, founder and proprietor of a Bronzeville neighborhood barbershop called the Barber Suite, was forced to close his doors for the sake of health and safety. But the abrupt kibosh on his income meant Burns had to scramble to keep body, soul and barbershop intact. Having cultivated a devoted following—literally since his middle school years, when he first started barbering—Burns was able to tap his community, and his ingenuity, to buoy the business. Which is how he became one of the first business owners to receive a $10,000 grant from the LISC Rapid Relief and Resiliency Fund, first seeded by a $7.5 million donation from Verizon.
Burns put the funding to quick use, creating an inviting website where he now sells grooming products and will soon offer online barbering classes. The money has also helped cover rent, payroll and other necessities that might have gone unpaid. “The grant means the world to me,” said Burns. “It’s helps generate income until we can come through this pandemic.”
In the nearly six months since the coronavirus turned life upside down in the U.S., millions of small businesses like the Barber Suite have shuttered or slowed down drastically, due to social distancing requirements, upset supply chains or customers needing to keep their distance—or all of the above. LISC saw this coming—and knew that Black- and other minority-owned businesses would be hardest hit by the economic fallout. These are the same entrepreneurs who historically have been shut out of mainstream credit and other capital streams, and many were already operating with precariously narrow margins. So by mid-March, LISC mobilized to create the Rapid Relief and Resiliency Fund, to get money out the door fast to those who needed it most.
The onset of the pandemic was soon followed by the protests against police violence toward Black Americans and our country’s systemic racism, a movement that is shining an unrelenting light on the economic inequities that go hand-in-hand with social injustice. Alongside the philanthropic response to COVID, LISC has seen a groundswell of interest from funders—corporations and celebrities alike—who also want to be part of the national reckoning around racial inequality. They have looked to LISC as an experienced organization whose work supports economic opportunity for residents and communities of color—and seeks to build systems that promote equity.
As a result, in fewer than six months, LISC has been able to raise and is in the process of deploying more than $200 million in grants and forgivable loans to small businesses in underserved places. That figure is the sum of grants from more than 70 companies, foundations and other entities. Some $90 million of that figure is reaching people through LISC’s deployment of Paycheck Protection Program (PPP) loans, via its SBA-licensed subsidiary immito, while the rest are individual grants targeted to small enterprises.
Nearly 90 percent of the 2,800 enterprises that have already received funds are owned or managed by minorities and women, and 10 percent are veteran-owned (a robust figure given that veterans account for seven percent of the U.S. population). Eighty-six percent of recipients provide goods and services in low-wealth Black and Brown communities, and the majority have been operating in those communities for more than five years—a sign of their commitment to their customers and neighborhoods.
LISC is also focusing on rural small businesses; $26 million of an extraordinary $55 million commitment from Lowe’s is earmarked for entrepreneurs in rural places. When the current funds are completely distributed, more than 4,000 small businesses will have benefited.
“This is by far the most extraordinary small business relief effort undertaken by our company. And we are not finished yet,” said Maurice A. Jones, LISC’s president and CEO. “Our aspiration is to help stabilize enterprises so they can survive the pandemic, and to lay the groundwork for recovery, reconstruction and growth. American competitiveness depends on the survival and wellbeing of our small businesses, particularly those owned and operated by Blacks and other People of Color. They are key to the success of our families, our communities and our democracy."
The unprecedented surge in both need and funder response has meant the organization has had to build new systems virtually overnight. “We needed to come up with a process for delivering grants that was as simple and rapid as possible, recognizing that we couldn’t look applicants in the eye and get to know them as has been our traditional approach to grantmaking,” says Bill Taft, a LISC SVP who directs economic development initiatives and has overseen the huge task of evaluating and processing funds for recipients selected from hundreds of thousands of applicants.
Alicia Keys gives a shout-out to LISC and small businesses as part of a Global Citizen livestream event.
Funders, for their part, have played an invaluable role in raising awareness about the plight of small businesses and the grant opportunity. Verizon harnessed its communications channels to promote their Small Business Recovery Fund with LISC through Pay It Forward Live, an online entertainment series featuring the likes of Usher, Dave Matthews, Chance the Rapper, Janelle Monáe, Billie Eilish and Alicia Keys. Usher, Matthews, Monáe and Keys, for their part, went on to donate to and/or promote LISC’s small business support on their own, including through a LISC partnership with Global Citizen. (For a full list of the donors, click here.)
Lowe’s, meanwhile, has leveraged its vast web of retail stores and online presence to help promote the grant program. So has Sam’s Club, which donated $1 million, and Wells Fargo, which is supporting small business lending and LISC-KIVA crowd-funded loans with a $15 million grant.
To push the effort beyond immediate relief and to shore up recovery and future-building for small businesses, LISC is also working to nurture nonprofit business development organizations (BDOs) which can offer technical services and “help businesses grow back out of this,” said Taft.
Using small business grants to build equity is a new strategy in and of itself, and demands a kind of bespoke grantmaking process, Taft explained. In addition to using standard business verification tools, LISC had to capture non-traditional measures of success to make sure entrepreneurs in low-wealth communities don’t fall through the cracks. Factors like a business owner’s connection to the community, and their length of time in business, for example, were accounted for. LISC program offices even interviewed some individual business owners and provided technical assistance to help them move through the screening process.
“We’re basically addressing every rung of the capital access ladder to meet the needs in these desperate times,” said Rachel McIntosh, a senior opportunity investment officer. “Being flexible and creative has made all the difference. Otherwise, small businesses hit a brick wall.”
The same goes for lending. LISC’s experience has shown that underwriting loans for entrepreneurs who don’t have robust banking relationships requires taking a broader view of what makes them a positive risk. Since the pandemic began, explains Steve Hall, LISC’s senior director for economic development lending, “we have focused on looking at existing small businesses and their historical performance. Then we work with them, and provide patient capital and technical assistance. We try to help them figure out what their business can look like during COVID, and after.” Making borrowing as manageable as possible for these small businesses, too, has also included lowering interest rates to as low as one percent, in some cases, and providing one-on-one application assistance.
Ultimately, the goal of LISC’s small business support in this moment is as much about boosting family wealth and income building as it is about relief and recovery. “We have focused over 90 percent of our grantmaking on entrepreneurs of color, and over 44 percent on Black entrepreneurs, as a means of bridging the wealth gap that has deprived these businesses of access to family capital,” says Taft. It’s the kind of capital that “many white businesses are able to rely on to survive and come back from challenges like COVID.”
Of course, no one knows what the future will bring, nor how many small businesses will survive the pandemic. But to a person, LISC’s grantees and borrowers say the support they have received has provided a lifeline when there were none to be found. April Teixera, who, like Orlando Burns, received a Verizon-funded LISC grant in April, says the capital is still helping her plan for the future of her business, the Corny Bread Company. “It has allowed me to pay off about $5,000 in business debt that would have lingered without revenue, and repay a small percentage of the investment I’ve made from my own funds. That still leaves a few thousand which is "mentally helpful,’” she adds, as she strategizes a restart for the Corny Bread Company in a post-pandemic world.