Community Credit Lab
ConnectUP!'s Character Based Lending Program for Entrepreneurs
"In the U.S., we have fallen prey to the myth of rugged individualism which detracts from the realities that we all need support and networks to get our businesses off the ground." - Elaine Rasmussen, Founder, ConnectUP! Institute
This lending program aims to show that when entrepreneurs and small businesses receive personalized support with capital that matches their needs, they will thrive. Rather than relying on credit scores and other underwriting practices that have been shown to exclude BIPOC & LGBTQ+ entrepreneurs, this "Character Based Lending" program will rely on trust and relationships between ConnectUP! and businesses in their network.
At Community Credit Lab, we believe that it’s possible to shift the financial system to prioritize humanity. At its core, this requires shifting money and shifting power to businesses and ecosystems that have, and continue to be, financially under-resourced. It also requires these same businesses and individuals to design and direct how capital is allocated within their communities - from the type of capital, to the evaluation criteria and terms.
To demonstrate what’s possible, Community Credit Lab and Common Future partnered with three entrepreneurship support organizations led and primarily focused on supporting entrepreneurs of color to launch three character-based lending programs. The lending programs will distribute capital based on relationship and trust to support entrepreneurs with affordable and flexible capital to help grow their businesses.
Each program was designed by their respective Lending Partner (including ConnectUP! Institute) to address the unique challenges of the businesses they support. Community Credit Lab provided program design support to each Lending Partner and will be providing loan management services needed to run and evaluate each of their lending programs.
Based on the programs designed, Common Future worked to source funders and impact-first investors in their network that would provide patient and affordable capital to resource the lending programs via a pooled vehicle (see the structure below). Each Lending Partner is testing what’s possible if we center the people that face challenges to accessing affordable credit in the design of these programs.
ConnectUP! Institute's Character Based Lending Program
Lending program for BIPOC and LGBTQ+ owned early stage small businesses in Minnesota
Our Lending Partner, ConnectUP! Institute (ConnectUP!), is a social finance and enterprise innovation center designed to connect underrepresented entrepreneurs to what they need to start and grow their business - from capital to technical support as well as advise investors on how to align their money with their values. ConnectUP! is an ecosystem builder and is rooted in the understanding of what it takes to build a thriving community of entrepreneurs.
ConnectUP! is piloting a community lending program that integrates financial and non-financial support for BIPOC and LGBTQ-owned early stage small businesses in Minnesota. Based on the experience of working closely with businesses, founder, Y. Elaine Rasmussen, identified what type of capital would be meaningful for the businesses in their network, how businesses should be evaluated as being ready to take on this level of capital and how can the loan terms be designed to not burden the businesses. Businesses funded through this program will be working closely with ConnectUP! staff to receive support on finance, operations, and strategy. Loans will reach entrepreneurs looking for capital between $5K-$50K with patient terms of up to 5-years (total current loan pool is $250,000 for this lending program).
Impact Investment Structure
This lending program utilizes a blended finance investment structure that combines returnable grants with impact-first investment from accredited investors. The investment structure and resourcing of this lending program was led by our partner, Common Future, as part of their Character Based Lending $800,000 impact investment initiative.
Interested in learning more about this lending program?
Interested in learning more about ConnectUP! Institute?
Interested to learn more about Character Based Lending & Common Future's work? Check out this blog from Common Future on Character Based Lending.