How do you start a business when you don’t have anything to use as collateral? In most cases, the answer is simple: You can’t — a bank won’t lend you the money. But one Mississippi-based nonprofit called Higher Purpose Co. is trying to change that for Black business owners in the Mississippi Delta.
In a state still reckoning with the legacy of slavery and Jim Crow-era economic inequities, the organization assists over 500 Black-owned businesses — 87% of which are run by Black women — by acting as an advocate and “capital matchmaker” to promote ownership and economic justice, said founder and CEO Tim Lampkin. Among its offerings are financial support mechanisms meant to mitigate systemic barriers at financial institutions that have historically stymied Black business development in Mississippi.
“We’re able to help entrepreneurs get access to zero-interest loans that don’t require any collateral, that don’t require any minimum credit score,” Lampkin said in an interview with Marketplace’s David Brancaccio. “Because we know, particularly when we’re working with Black-owned businesses, the collateral and credit score [requirements] are two main issues that stop Black-owned businesses from going after the capital that they need.”
The following is an edited transcript of their conversation.
David Brancaccio: You may have attended these things — I once attended a [Small Business Administration] training on how to be an entrepreneur, and the guy on the stage looks at all of us and yells, “Where are you gonna get your startup money? And don’t say your parents!” I mean, startup money is hard. And what, in your experience, it’s harder for some groups of people?
Tim Lampkin: Absolutely. When we look at the work that we’re doing, particularly here in Mississippi with Black-owned businesses, we know that when it comes to access to capital, there are so many different barriers. And so we’ve been working very hard over the last six years to break down some of those barriers. In the last 2½ years, we’ve been able to deploy over $1 million of capital to Black-owned businesses in Mississippi. And so we’re really excited about that, and really trying to change the narrative around how access to capital is approached here in Mississippi, but [also] across the country.
A “buffet of capital options” for businesses
Brancaccio: How do you get the money to do this? It’s about, in part, matchmaking, right?
Lampkin: So we consider ourselves a capital matchmaker. We have what I describe [as] a buffet of capital options, where we’re able to really meet the entrepreneur where they are. So we have grants, we have zero-interest loans through our Kiva partner, as well as low-interest loans through community development financial institutions, and then lower on down the scale of the capital stack is the venture capital. And so we’re able to really bring a unique approach to this process. And working with those entrepreneurs, we are able to raise grant funds that we’re able to re-grant out to businesses, and then as well as leveraging the capital that the different financial institutions have to really match that with the entrepreneur.
Brancaccio: You mentioned Kiva partners. That’s a separate organization, a nonprofit in itself.
Lampkin: So we’re the only Kiva hub in the state of Mississippi. So we’re able to help entrepreneurs get access to zero-interest loans that don’t require any collateral, that don’t require any minimum credit score, because we know, particularly when we’re working with Black-owned businesses, the collateral and credit score [requirements] are two main issues that stop Black-owned businesses from going after the capital that they need. And so working with Kiva has been tremendous to really help our entrepreneurs get access to that type of affordable capital.
Overcoming systemic barriers
Brancaccio: Underlying all of this is that a traditional source of capital—borrowing from a bank—there may be structural problems in that system, right? And in your view, banks still use criteria that unfairly discriminate against would-be buyers, who are people of color?
Lampkin: We’ve seen in the last 2½ years, particularly since the pandemic hit, several financial institutions have been more creative in terms of their lending criteria. And then that started to really creep back into the kind of traditional criteria, right? So I think the pandemic showed us that there is a lot of flexibility in terms of repayment structures, interest rates and things like that. And even as we think about closing costs, that makes capital more affordable. However, going back to that collateral piece has been really a barrier for a lot of Black-owned businesses. So we have actually raised our own loan-guarantee pool that we use as a way to stand in the place for collateral. So if a person doesn’t have collateral, we’re able to basically reduce the risks for the borrower as well as the lending institution by guaranteeing that loan up to 50%. So if something happens to that loan, you know, it’s still a win-win situation for the financial institution. And so we’re seeing some progress in many financial institutions and how they’re working with entrepreneurs to create new products. But there’s still a lot of work to do in this space as we continue to really use capital access as a way to open up business ownership for so many, particularly here in Mississippi as it relates to Black business owners.
Brancaccio: So this network of funding is one thing. Do people also lend expertise, guidance? Is that also part of the network?
Lampkin: Absolutely. So our model includes education, advising and funding. So with the education piece, we have quarterly meetings with our 500 members right now across the state, and then we also do monthly meetings with those entrepreneurs and we bring in speakers and trainers and facilitators. And then we continue to do that one-on-one advising with those entrepreneurs, depending on where they are in their business and then we wrap that with the financial piece, right? The capital access piece. So it is very much so a unique model within itself, and we’re creating this three-pronged approach where we’re able to meet the entrepreneur no matter where they are in the stage of their business because that’s very critical. Because without having the advising, you have capital and may not know what to do with it or may not be able to spend it wisely. And so it’s really critical that we pair that capital with advising and continue to provide that ongoing education and support with those entrepreneurs. And you know, making sure that we’re with them every step of the way.
Brancaccio: I have a “brain drain” question, Mr. Lampkin. You’re from Mississippi, I understand. And you probably had options, but you chose to serve your home state and not move to where the big money is.
Lampkin: Absolutely. So I believe in purpose. And I truly understand that this is the work that I’ve been called to do at this particular time and at this particular place. I think what oftentimes has happened is that, particularly when we look at millennials, when we look at the different opportunities in larger cities and things like that, it definitely can be more lucrative as it relates to money and finance and all those materialistic things. And at the same time, is it really making you fulfill as a person? And so I get the opportunity to do amazing work. I get paid to do that work, as well [as] see the direct impact in my community. And it’s really also about leaving a legacy. And so I encourage anyone who is listening to this that is on the fence of struggling with how they can get involved or stay involved with their hometown or their community, there’s ways that you can do that, there’s ways that you can find a problem and then be a part of the solution. And that’s what I did with building Higher Purpose Co.
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