Bank of America targets more investment funds supporting diverse small businesses
More capital is coming toward funds dedicated to finance entrepreneurs from Black, Hispanic-Latino, Asian and other under-represented communities.
The largest second U.S. bank by assets announced on Thursday, May 20 that it is increasing its target for equity investment in minority-focused funds from $200 million to $350 million.
Such funds are specialized in providing capital to Black, Hispanic-Latino, Asian, Native American, other under-represented minority and women entrepreneurs, who look for capital to expand their small businesses.
In less than a year, Bank of America has committed more than $250 million to 90 investments funds across the country, according to a press release.
In June of 2020, the bank launched a $1 billion commitment to increase economic opportunity to underserved communities, which was later increased to $1.25 billion in March and to be rolled out in five years.
Among some of the funds benefited by this commitment and that have a focus on Latinx entrepreneurs are VamosVentures, L’Attitude Ventures and Ulu Ventures, all based in California. Other recently closed equity investments include venture capital funds such as Elevate Capital (OR), Cleo Capital (CA), Zane Venture Fund (GA), Avenue Growth Partners (D.C.), to name a few. These are companies that are also led by diverse fund managers and finance small businesses throughout the U.S.
Bank of America is also directing a separate $50 million commitment in equity investments toward smaller banks, known as minority depository institutions (MDI) and community development financial institutions (CDFI), which have a larger arm to reach low- or moderate-income and rural communities.
For this specific type of support, Bank of America acquires up to 4.9% of common equity in the selected MDIs and CDFIs. Through these equity acquisitions, these smaller banks strengthen their balance sheets and can provide more access to capital to cover general lending, housing, neighborhood revitalization, and other banking services.
To date, it has completed investments in 17 of these institutions.
“Equity investments in minority focused funds, MDIs and CDFI banks help address a persistent gap in access to growth capital. By providing this capital, we’re helping to level the playing field and open more doors for minority led businesses, entrepreneurs and innovation,” said Brian Moynihan, CEO of Bank of America.