If prospective entrepreneurs were queried on the number one impediment to launching and growing a business, the lack of access to capital would likely be right up there on the board.
The survey would also probably reveal that the problem is even more acute for minorities and women, in particular.
Related: "Memphis Money: Community-based startups struggle to find capital beyond debt-based platforms"
In an effort to chip away lending disparities, Epicenter, a local nonprofit entrepreneurial support organization, has partnered with Pathway Lending, a regional nonprofit Community Development Financial Institution, to launch the Memphis Small Business Opportunity Loan Fund.
The $15 million fund, which is backed by three local financial institutions, will improve startups' access to capital, particularly for women- and minority-owned businesses.
"We realize that women-owned businesses have grown over 114 percent in the last 20 years and firms owned by women of color have grown over 467 percent. Women-owned businesses strengthen our local communities, national economy and encourage other females to consider entrepreneurship," said Travis Hughes vice president of lending and clients relations in West Tennessee with Pathway Lending.
Pinnacle Financial Partners, First Tennessee, and Regions Bank anted up funding for the initial $15 million dollar bankroll.
“This particular fund is exciting for us. It recognizes the investability and pipeline of entrepreneurs and small businesses in Memphis and puts enough capital at play to have a significant impact," said Leslie Smith, Epicenter president and CEO.
An influx of capital will not only strengthen existing small businesses, but help others get off the ground, too.
"It brings the resources of a strong financial partner in Pathway, who has a great track record in lending, but is also supportive in programming and technical assistance that flows into the small businesses they support," Smith added.
The Memphis Small Business Opportunity Loan Fund will provide businesses in the Memphis region that may not yet qualify for a conventional bank business loan with access to loans ranging from $5,000 to $1,000,000 to support growth opportunities, Epicenter stated. Small businesses may also access technical assistance from business advisors.
"One of the things we’re trying to do is ensure that entrepreneurs have the access to capital they need across the continuum and that barriers to that access are removed. That resources are abundant and appropriate,” said Smith, whose organization also offers programming, talent development, and startup accelerators to foster Memphis' entrepreneurship economy.
The "flexible" debt-based platform gives entrepreneurs another option in scaling their businesses, Smith said. Early stage funding may come from family and friends or angel investment. After seeing growth, the entrepreneur enters a phase where they can take on debt to grow their business.
“You typically transition into debt or equity debt. If priced appropriately, it [debt] can be more affordable for entrepreneurs than equity because with equity, you give up a piece of your company and not all entrepreneurs want to do that,” said Smith.
However, many burgeoning business people accept the Shark Tank-style equity transaction. The Memphis Small Business Opportunity Loan Fund fund makes sure that options are available that are suitable to the particular stage of the company's life. Smith sees it as another piece in her organization's focus in developing Memphis' robust capital stack.
“We refer to the capital stack as the varieties of capital that entrepreneurs need access to throughout the life of their business," she said.
"So we want to make sure that there’s access to equity in our community. All of those pieces of capital, which includes traditional bank set and later-stage private equity, are available in the appropriate scale. And that any barriers that exist to accessing that capital are removed."
Creating a pool of money is one thing, but leading the entrepreneur to it is another. To ferret out those great ideas bursting with potential, Epicenter has networked with other community partners.
“I think we’ve organized our partners in the community to create a robust referral pipeline into this opportunity. If you’re working with any partners out in the community with whom we are engaged with — which is pretty much everyone who touches small businesses and entrepreneurs — you can be referred to our Pathway partners,” said Smith.
Epicenter and Pathway Lending will provide further information in upcoming workshops. They will be held on June 25 from 5:30 to 6:30 p.m. and June 27 from 8 to 9 a.m. at Epicenter, 902 Cooper Street.
“We are also doing a series of monthly workshops where we can get a bunch of folks who are interested in the underwriting and the terms and the appropriate sized deals can come and learn more,” said Smith.