A new fund launched April 27 to support small businesses and nonprofits in the South.
The Southern Opportunity and Resilience Fund has more than $50 million in its initial commitment provided by philanthropic, private and corporate investors. It aims to raise $150 million to provide affordable capital and free business support to small businesses and nonprofits in 15 Southern states, including Texas, to help the businesses rebuild from Covid-19.
The SOAR Fund was created by 13 Community Development Financial Institutions in the South, including San Antonio-based LiftFund and Austin-based PeopleFund. The SOAR Fund and CDFIs said they're focused on helping minority-owned businesses, and the loans are designed for those that have historically been underbanked.
“The Covid-19 pandemic has exacerbated an already uneven recovery from the Great Recession. Southern states had slower economic growth, lower labor force participation and higher unemployment than the rest of the country, partially driven by the historic lack of corporate and philanthropic investment in the region,”said George Ashton, managing director at Local Initiatives Support Corporation, which manages the fund. “The SOAR Fund, with support from leading banks, foundations and corporations, will tackle these issues head-on by addressing structural barriers to economic opportunity by providing capital to Southern small businesses and nonprofits that need it now.”
The fund, which was inspired by similar models that have succeeded in New York and California by working with local CDFIs, will offer flexible, affordable loans of up to $100,000 to small businesses and nonprofits that have fewer than 50 full-time employees and have been impacted by the pandemic.
There are two different loans offered under the program with different repayment schedules and interest rates:
- 4% for for-profit businesses and 3% for non-profit organizations for a 60-month term
- 4.5% for for-profit businesses and 3.5% for non-profit organizations for a 72-month term
PeopleFund said the SOAR fund is expected to run until the end of 2021. Amanda Markoe, the marketing manager at PeopleFund, said small, minority-owned businesses have a unique challenge in Texas.
"With Covid-19 and the effects of the winter storm, there's still a need for capital and helping small businesses, especially businesses that are underserved, which are typically minority-owned businesses in rural areas," Markoe said. "The reality is that businesses are still picking up the pieces from the pandemic and the storm. So a lot of it is anxiety and thinking ahead."
According to the U.S. Census Bureau Small Business Pulse Survey, 57% of Texas small businesses have less than two months cash on hand, and 35% of Texas small businesses expect to seek capital in the next six months.
LiftFund, which has a significant Houston presence and averages $20,000 in loan sizes, will also be a lender for the SOAR Fund. Celina Peña, the chief advancement officer at LiftFund, said having CDFIs distribute the money helps people connect to capital as local lenders have a pulse on the community and are able to reach diverse businesses through marketing and word of mouth.
"We need to be doing this now so we don't see a lagging economy for small businesses," Peña said. "If you think about the diversity in the South, … it's one of the most diverse areas for African American populations and Hispanic populations as well. We know we need to be here."
The fund will cover Alabama, Arkansas, Delaware, Florida, Georgia, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia and the District of Columbia.
