Miami Re-Investing in the Small-Business Economy, or RISE, is en route to disburse $18 million in low-interest loans to nearly 1,000 truly small business owners in the county affected by COVID-19 shutdowns.
The kicker: we stood up the fund and distributed these loans in roughly seven months.
The story of how we managed to pull this off shows how collaborative efforts such as RISE can be a model for responding to future crises.
It was late March, 2020, and shelter-in-place orders prompted by the rapidly spreading coronavirus were updending life and economic activity. Miami, like other cities, worried about its small brick and mortar businesses that didn’t have the financial cushion to weather a prolonged crisis. Little did we know then how long that would b).
The area has more than 66,000 small businesses with under 10 employees, many of them in the hard-hit hospitality sector.
Miami has limited civic capacity to engage in core community development activities, with fewer nonprofits centered on community and economic development than other large metro areas, according to the Federal Reserve. So organizations like mine, Self-Help, a credit union that is a designated community development financial institution, of CDFI, were scrambling to respond to the growing crisis.
That’s when the call came.
Falling through the cracks
The first wave of the federal Paycheck Protection Program was becoming available. Ines Hernandez, of Citi Community Development, called me, Maria Coto of local CDFI Partners For Self-Employment, and Fabiana Estrada with AscendUs (formerly Accion East) to understand a bit better what that would really mean for small business entrepreneurs.
Our view at Self-Help was that it was definitely a step in the right direction. But we had a nagging feeling that many independent contractors and small business owners would fall through the cracks, due to not enough capital, unclear guidance, access to documentation, etc. Looking back, those concerns were well-founded.
Ines threw down the gauntlet. “Can we do something as a consortium of CDFIs and funds from the county’s CARES allocation?” she asked? “And how can Citi help?”
To say this would be unprecedented is an understatement. I had been advocating (not to say openly critical) for more collaboration and true partnership in a community lending ecosystem in which there’s plenty of good intent but rarely meaningful involvement to be more than the sum of our parts.
So, I did the only thing that could be done at the time: I paid for a Zoom subscription and started convening people and having one-on-ones as quickly as I could.
I asked Self-Help’s brain trust and small-business customers for the best ways to approach this. I came across a revolving loan fund Self-Help had put together to mimic SBA-type guarantees in Charlotte, N.C. It looked interesting, yet simple: A loan-loss reserve, some subordinated debt, senior debt, an administrator – and a pool of operational CDFIs to streamline small business lending and provide a pool of readily available capital that could grow over time. (We weren’t aware of it, but similar efforts were being hatched in New York and elsewhere with help of Calvert Impact Capital).
Within two weeks, we had a lot of interest from other local actors and from Commissioner Eileen Higgins of Miami-Dade’s District 5. By then, we had convened a broader group of like-minded local CDFIs with Michael Sellinger of Miami Bayside Foundation and Danielle St. Luce of Black Business Investment Fund.
The idea took shape: a collaborative revolving loan fund seeded by the city with flexible CARES Act funds that could ramp up relief to Miami’s many small businesses.
Again, I did the only thing I thought I could do: created three shared documents for everyone to chip in and give shape to:
- Who we are, what we do/have done (plus existing products and programs);
- a draft of what a revolving loan fund looks like and some potential product/program characteristics that would target those that were not benefiting from federal and state programs; and
- an operating agreement between administrator and operational CDFIs.
As stringent lockdowns continued, the details were hammered out over Zoom, phone and email. Suffice to say there was an awful lot of, “You are on mute”, along with back-channeling between the different actors, commissioners, other CDFIs, county team individuals, presentations, iterations around documents, and “They don’t know what they’re talking about” comments.
Amazingly enough, it looked like the County Commissioner’s team managed to get buy-in from then-Mayor Carlos Gimenez to get it in front of the rest of the commissioners. In other words: we had an opening and a nod in the direction of our $25 million dollar proposal.
After a lot of tweaking and some last minute changes, the resolution to create Miami-Dade RISE Fund was unanimously approved in a vote by Miami-Dade’s 13 county commissioners. The fund would be administered by a recently certified CDFI, the Dade Federal Credit Union, and spearheaded by our very own Michaeljohn Green (part of the CDFI ecosystem and early conversations). We were on!
The fund would leverage the $25 million from the city to draw in private partners. Citi Foundation was the first corporate sponsor. The low-interest loans would initially go to small businesses that weren’t able to access PPP loans.
We set up a Policy Board to govern the fund, with purview over some of the loan terms so that we could open or close floodgates as we got a pulse on applications and other programs that were coming through. We also made use of artificial intelligence from Cognistx to help us keep on top of the loan application volume and ensure equitable distribution of applications and loans across the county.
A year later, we’re still coping with the pandemic. While an end is in sight, the impact on small businesses is likely to be lasting. CDFIs have once again demonstrated they can reach the most vulnerable small businesses.
And collaborations like Miami RISE established during the pandemic provide a model for moving quickly and efficiently to deal with future crises.