A new pilot program supported with $1 million from the Rocket Community Fund aims to help Detroit-based contractors grow their businesses and keep construction dollars in the city.
Deana Neely, founder and CEO of Detroit Voltage, said minority contractors who are turned away by financial institutions can’t compete for projects and lose out on development opportunities in the city. The newly announced “Motor City Contractor Fund,” she said, will benefit Detroit business owners by connecting them to financing, technology training and business advisory services.
“When my business was started, I bootstrapped it, using my personal credit cards and savings to cover jobs and other business expenses,” Neely said during a Tuesday morning news conference. “Unfortunately, I was not bankable at the time due to an unexpected divorce and financial hardships that followed. I have been turned down for funding several times. Many times I’ve been forced to turn away projects because of the lengthy payment terms, upfront material cost and in some cases, stringent bonding and insurance requirements.”
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The $10 million pilot has room for 20 contractors in its first year, but organizers want to serve 300-400 businesses over the next several years. The first cohort is made up of contractors referred by partner organizations. The program will open to the public in early 2023. Interested contractors can get on a mailing list to receive updates.
Eligibility is not based on credit, but contractors will need to demonstrate they have two years of experience and at least one employee.
Contractors can apply for a maximum loan of $300,000 with a fixed interest rate of 7% paid back over a period of two years. Each participating contractor will also receive a $5,000 grant toward business growth strategies. Invest Detroit will serve as a loan originator for the contractor fund pilot.
Nicole Sherard Freeman, executive director of Detroit’s workforce development, said there aren’t enough contractors to meet the city’s needs for rehabilitation, demolition and new construction.
“We need contractors to do this work and there are no contractors we would rather work with more than Detroit-based, minority-owned, women-owned contractors in this city to rebuild this city,” Sherard-Freeman said. “Rocket and the Motor City Contractor Fund just took a hammer to one of the biggest problems we have in Detroit, which is access to no-cost or low-cost capital, access to technical assistance for one of the most important assets we have; contractors who have been historically closed out of the kind of opportunity that is available in the city right now.”
Vice President of Rock Holdings Inc. Bill Emerson, citing a statistic from the city, said there are 66 certified contractors in Detroit, of which 48 are minority-owned. There are more than 1,300 accredited contractors in the metro Detroit region.
“Do the math, it’s simple: There’s only 5% of the contractors in metro Detroit that are based in Detroit and more than $5 billion in annual commercial construction that happens in Detroit is wealth that is leaving the city and leaving the Black community,” he said. “The Motor City Contractor Fund, which is only open to Detroit-based contractors, is here to level the playing field and serve as a model so that we can lift up our Black businesses and allow them to achieve greater economic mobility and opportunity.”
Krysta Pate, vice president of economic and social justice for the Community Reinvestment Fund, said smaller companies primarily run by Black entrepreneurs have a harder time securing low-interest loans and less wealth to invest in their business. Minority-owned contractors, she said, also lack the online presence and technical expertise needed to advertise and complete certain projects.
“We listened to small business contractors and they told us what they needed: More resources for expansion and growth,” Pate said. “That also means small business contractors need more than capital. They deserve access to the kind of technical assistance big companies rely on for growth.”
Training modules and other support tools were developed by city-based LifeLine Global Consulting and Barton Malow Builders. Qualifying contractors can receive training on accounts receivable, business and growth planning, contract management, contractor qualifications, general accounting principles and taxes, labor management, legal aspects of construction, pitch presentation, proposal development, safety training, social media and other topics.
Rocket Community Fund, the philanthropic arm of Rocket Companies Inc., is contributing $1 million in start-up money for the effort and JPMorgan Chase directed $500,000 toward getting the program off the ground. Community Reinvestment Fund, Invest Detroit and Barton Malow are providing an additional $9 million to fund the first-year of the pilot.
Pate said partners are looking to other nonprofit groups to fully fund the program. She said it could take $30 million to $60 million to make it sustainable long-term.
Tuesday’s press conference comes just over a year after the Rocket Community Fund and Gilbert Family Foundation pledged a 10-year, $500 million investment in community revitalization projects. It was billed as an effort to support solutions “built by and for the community” as opposed to well-intentioned but ineffective programs of the past. Promotional materials set lofty goals including ending homelessness, preventing displacement, building wealth through homeownership and bridging the digital divide.
The Gilbert Family Foundation, founded by billionaire Dan Gilbert and his wife Jennifer, pledged $350 million to the cause, with the remaining $150 million coming from the Rocket Community Fund.
Pate said there was no discussion with the foundations about supplying more money to the contractor fund.
“We have not talked to Rocket Community Fund about the $500 million commitment, I think that’s their own commitment outside of the Motor City Contractor Fund and this is just one of the investments that they are participating in,” Pate said. “Plus, this is a collaborative effort. We have over 30-plus stakeholders and we have about nine or 10 interested organizations that want to donate to this program. I think the more seats we have at the table, the more equitable and the more sustainable this program will become.”
Emerson provided a brief update on where the Gilbert Family Foundation and Rocket Community Fund have focused their resources in the last year. A total of $23 million has been spent so far, including $8.4 million on employment initiatives and $7.6 million on housing-based initiatives.
An initial $15 million investment was aimed at wiping out back taxes owed by 20,000 low-income homeowners. A total of $585,150 has been spent supporting The Detroit Tax Relief Fund. Emerson said 4,500 homeowners have had their delinquent property taxes paid for.
The Detroit Tax Relief Fund is administered by the nonprofit Wayne Metro Community Action Agency. Homeowners must first get approval for two other programs that help cover delinquent property taxes. Call (313) 244-0274 to learn how to apply.