EDA Partners with Blueprint Local, Drexel University to Explore Innovative Finance Models for Small Business
Small businesses have always faced persistent barriers in accessing capital. This problem has been greatly exacerbated by the coronavirus pandemic, as businesses have seen even greater inequities and challenges.
According to data from the Kauffman Foundation, 83 percent of entrepreneurs cannot access traditional capital markets, such as venture capital and bank loans, leaving many businesses unserved. 1
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This week, the Economic Development Administration (EDA), through its Research and National Technical Assistance program, awarded a $904,710 grant to Blueprint Local Investments and sub-awardee the Nowak Metro Finance Lab at Drexel University. The grant is the major funding element of a $1.2 million initiative — the Innovative Financing Models for Coronavirus Recovery Project — that seeks to examine novel and emerging approaches to capital access for small businesses.
“Through its Revolving Loan Fund program and Build to Scale Capital Challenge, EDA has long been a pacesetter and innovator in providing critical gap financing to businesses that can’t obtain traditional bank loans or other forms of capital,” explained Craig Buerstatte, Deputy Assistant Secretary of Commerce for Economic Development responsible for Regional Affairs. “This new partnership with Blueprint Local and the Nowak Metro Finance Lab will allow us to explore alternative models and emerging types of capital access that have the potential to expand the EDA playbook and those of economic development organizations across the country.”
The Innovative Financing Models for Coronavirus Recovery Project will provide technical assistance to six economic development organizations working to implement pilot programs that use innovative models of business financing. Those organizations are: VELOCITYTX of San Antonio, Texas; Opportunity Alabama of Birmingham, Alabama; the Minority Business Accelerator of Cincinnati, Ohio; the Baltimore Development Corporation of Baltimore, Maryland; the Utah Association of Counties of Salt Lake City, Utah; and NDC CDFI of Seattle, Washington. The insights and findings of these partnerships will be used to develop a toolkit of resources that will be made available to economic development organizations throughout the United States. EDA will not be using these research funds to capitalize individual funds but will be leveraging these engagements to support innovative and experimental findings.
Blueprint Local, a national platform that invests for impact in economically distressed communities across the U.S., is spearheading implementation of the initiative.
“Hundreds of entrepreneurs are going out of business every day in the U.S., and existing investment models such as traditional lending and venture capital overlook the vast majority of businesses that have been hardest hit by COVID-19,” said Ross Baird, CEO of Blueprint Local. “We are thankful for the opportunity to work with the EDA and Drexel to pilot innovative solutions that can help communities across the country invest in an entrepreneur-led, post-COVID recovery.”
“COVID’s disruption has been devasting for small businesses, commercial corridors and business districts, particularly in underserved communities” said Bruce Katz, founding Director at Nowak Metro Finance Lab, the grant’s sub-awardee. “We’re grateful for EDA support and eager to work with our partners at Blueprint Local and six pilot cities to identify innovations that can propel communities from crisis to opportunity.”
The Innovative Financing Models for Coronavirus Recovery Project is an 18-month initiative expected to run through 2022.
1. The State of Access to Capital for Entrepreneurs: From Barriers to Potential. (2019, February 5). Retrieved March 9, 2021, from Ewing Marion Kauffman Foundation website: https://www.kauffman.org/wp-content/uploads/2019/12/capital_access_lab_exec_summary_FINAL.pdf (PDF)