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Minority-owned businesses to gain more access to capital

24 CDFI lenders will comprise the first wave of the Finance Collaborative. They will partake in an intensive two-year training course, which will include peer…

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Goldman Sachs and the Opportunity Finance Network introduce the “Finance Collaborative,” a training program for 24 small business lenders who work closely with minority business owners across the country.

Small businesses create two out of every three jobs. They employ 60 million Americans — about half of the private sector. With a shaky economic recovery, the ideal solution for a Fortune 500 Bank that benefits most from healthy business is to reinvest money into job-making opportunities on the ground level.

That’s what Goldman Sachs has done.

In 2009, following the the success of their 10,000 Women program — a global effort to support female entrepreneurs — Goldman Sachs launched another 10k-themed program to enhance small business growth in the U.S.

10,000 Small Businesses (10KSB) is a $500 million initiative that gives both starting and established entrepreneurs the tools they need to grow their business and thus give back to the economy. And it’s totally free if your application gets accepted. AL DÍA spoke with a Philadelphia-based Latino graduate a few weeks ago, who said he’d encourage even his competitors to take the program.

Goldman Sachs has been closely watching the outcomes of 10KSB, noting an nationwide increase in small business activity, lending, interest, and other resources coming into the private sector. But there’s more that could be done.

After the 2008 market crash, the credit line froze, and a lot of businesses failed because couldn’t get access to credit. Goldman Sachs partnered with Opportunity Finance Network (OFN), a network of 200 well-established CDFIs across the country, to find a solution. How could they help CDFIs help other businesses access capital?

“One of the things we really focused on is that access to capital is very hard for people of color,” said Mark Pinsky, OFN president and CEO.

The data directed them. In their research, the two organizations found that Latino-led businesses are growing faster than any other. And if that’s where the growth potential is, Pinsky said they have to seize it.

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One of the things they discovered was how few of these small businesses we’re working with each other. The support network just wasn’t there, and so they decided to leverage that opportunity in terms of coaching not just the businesses, but their small business lenders (CDFIs) across the country.

“In partnership with OFN, we selected 24 CDFIs and mission driven lenders that have a strong track record of lending to minorities and low to moderate income borrowers that are underserved by the traditional banking system,” Cristina Shapiro, vice president at Goldman Sachs Bank.

These 24 lenders will comprise the first wave of the Finance Collaborative. They will partake in an intensive two-year training course, which will include peer learning — in hopes of closing the gaps between small businesses and CDFIs — as well as technical assistance.

“It’s not one of those things where you can skip class,” Pinsky said.

The course will comprise of webinars, phone calls, and lots of homework. Each CDFI will have to create its individual growth strategy. Following the course, Goldman Sachs and OFN plan to monitor and to the challenge the graduates as they apply their new tools to their old lending practices.

It’s too soon to tell if the outcomes will match the expectations of the Finance Collaborative. But Christina Shapiro is optimistic about an Increase in amount (# and $) of small business loans originated and funded while maintaining strong portfolio performance.

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