ImpactAlpha, October 12 — A fixed-income strategy that has helped hundreds of low-income, women-led and Native families in New Mexico access housing and homeownership is set to expand into small business loans in underserved communities in the state.
New Mexico Small Business Investment Corp., or NMSBIC, has allocated $25 million to Local Impact Fixed Income Targeted Investment New Mexico, or LIFT NM, a bond strategy managed by Toronto-based RBC Global Asset Management.
LIFT NM launched in New Mexico last year with $11 million from local foundations and institutions to boost homeownership, affordable rental housing and healthcare in the state (for context, see “How place-based investors are pooling endowment capital for local affordable housing and small-business lending”).
So far, the initiative has focused on meeting the demand for housing finance. LIFT NM has helped more than 50 low to moderate-income families access mortgage loans for single family housing and more than 200 low-income households, majority of which are led by women, secure affordable housing units on tribal land.
With the new investment, LIFT NM will partner with national community development finance institutions, or CDFIs, to expand access to small business capital in New Mexico.
“This investment is an important step in supporting small business development, delivering more services to the residents of New Mexico, and providing more job opportunities within the local economy,” RBC GAM’s Ron Homer told ImpactAlpha.
NMSBIC, a state-backed economic development vehicle, is funded with approximately $100 million from the state government of New Mexico’s Severance Tax Permanent Fund.
Since inception, the nonprofit has provided debt and equity funding to local community development finance institutions, or CDFIs, to deploy technical assistance and low-interest loans to small businesses in New Mexico. During Covid, the nonprofit deployed $45 million in pandemic relief for CDFIs.
NMSBIC’s partnership with CDFIs “has really been successful and has been growing, and we continue to be impressed with the incredible job they do in making loans to small businesses,” NMSBIC’s Russ Cummings told ImpactAlpha. Cummings says these CDFIs are originating high-performing loans using high-touch lending, working closely with small businesses.
“We saw the RBC Access Capital Strategy as just being a logical extension of what we’re already doing with our CDFI lending,” he says.
LIFT NM will originate up to 200 “Community Advantage” loans, an affordable financing option under the U.S. Small Business Administration’s 7(a) loan program. The SBA loan was designed to help small business owners with expanding their working capital pool, purchasing inventory or equipment and other business expenses.
RBC GAM will bring on SBA lending specialists to originate the SBS loans, including L.A. Black-owned CDFI Lendistry, Arlington, Va.-based Capital Impact Partners and local nonprofit community lender Dreamspring (formerly Accion New Mexico).
NMSBIC is hoping by bringing RBC GAM’s network of national CDFIs closer to New Mexico, its own network of local CDFIs will benefit from their expertise.
“Doing SBA loans requires a lender with a pretty high-degree of experience and capability, and is a great fit for our CDFI lending program” said Cummings. “But there’s some bureaucracy when you work with SBA and some lenders don’t want to go down that path.”
RBC GAM will purchase originated loans from the SBA lending partners and hold them in a separately managed account. NMSBIC will purchase the loans from RBC GAM.
RBC GAM’s Access Capital Community Strategy, through funder collaboratives in at least half a dozen states, including California, New York and Minnesota, has more than $1.5 billion in assets under management.
In Minnesota, RBC GAM has raised more than $112 million from local foundations, including the McKnight, Bush and Minneapolis foundations, for its Minnesota Impact Investing Initiative with the Minnesota Council on Foundations.
Since it launched in 2017, the program has supported access to homeownership and affordable multifamily housing for more than 500 low-income families in the state, which has one of the widest racial wealth and homeownership gaps in the U.S., according to the Federal Reserve Bank of Minneapolis.
At least eight out of every 10 units in the affordable housing communities are rented by women. Most of the properties are located in Black, Indigenous, and people of color neighborhoods.
“The global pandemic produced stark disparities in economic impact and health outcomes within low-income and BIPOC communities which exacerbated the already troublesome issue of income inequality in America,” said Homer.
“As we look forward, RBC GAM will continue to partner with foundations across America to make targeted investments that aim to reduce these inequalities while fostering economic growth and other positive social outcomes.”