For Alana Solís, it’ll be about drizzling chamoy on a mango flor today and creating generational wealth tomorrow.

For Cortnie Smith, it was buying a grill and gear to transform her side hustle into a catering business.

For Katrina Calderon, it meant buying better camera equipment for her marketing agency so she could land bigger clients.

The BIPOC Loan Fund, operated by the Community Investment Corp. in Tucson, offers no-interest microloans to entrepreneurs from communities of color like these women who are ready to grow their businesses.

The fund was launched in the wake of a White Minneapolis police officer murdering George Floyd and local and national calls for racial equity and justice in 2020. CIC staff wanted to draw from their resources to act on shifting power in capital lending so that decision-making more equitably includes people of color and Black and Indigenous people who are underserved by financial institutions.

Unlike traditional business loans with a history of racial discrimination, the program leaders couldn’t care less about a business owner’s credit score, says Keneshia Raymond, a BIPOC Loan Fund committee member. 

“We want to know why you created the business and why it’s important to the community to continue to back you,” she says. 

The qualifying criteria are about the person’s values, talents, expertise, community-base and goals as much as their growth potential.

The program worked for Calderon, who prides herself on perseverance but who felt defeated after trying traditional lending channels.

“It really felt like we were the most supported we had ever been in the process of starting a business,” she says.

The BIPOC Loan Fund in Tucson is Arizona’s first character-based lending program.

The fund launched last year and has loaned money to 16 businesses owned by people of color. The no-interest loans were for $10,000 or less for a term of 1-5 years and required no collateral.

Starting July 1, the BIPOC Loan Fund in Tucson is relaunching and expanding as a rolling fund to benefit more entrepreneurs of color across Southern Arizona who may not otherwise have access to capital. Up to four loans will be awarded each month.

Leaders are raising money to grow the fund from $300,000 to $1 million.

The program exists as an experiment in change for BIPOC business entrepreneurs who have long experienced racism in an American business industry that romanticizes stories about pulling yourself up by your bootstraps. That’s not the problem for people of color, especially for women of color. They say their boots are worn thin by the realities they face in systems and institutions that discriminate. 

The U.S. Federal Reserve found widespread inequality problems that existed before BIPOC communities were disparately affected by the pandemic and inflation. The U.S. agency documented those disparities in a 2017 report:   

• Black owners were turned down for loans at rates twice as high as White business owners. While Black-owned firms were the most likely to have applied for bank financing, less than 47% of these applications were fully funded.
• When Black business owners’ lending was approved, their rate of denial for receiving full financing was the highest among all categories by more than 10%.
• Black-owned firms were the most likely group to have applied for a credit card and experienced the highest rate of denial.
• A smaller number of Black-owned and Hispanic-owned businesses received loans of $100,000 or more compared to other ethnic groups.

In Arizona, most Black-owned businesses are less than six years old and tend to be in the healthcare and professional services sectors, which is “attributable to various social and economic factors including a lack of access to investment capital,” according to The State of Black Arizona, a nonprofit data analysis group.

Lower cash reserves and “weaker relationships with banks” meant more Black-owned businesses closed during the first few months of the pandemic than businesses owned by other racial and ethnic groups, the group said in a report last year.

Character-based lending is a potential solution. In this system, a loan application takes into account a business owner’s community involvement and expertise more than credit scores and other traditional business metrics, which haven’t historically included BIPOC communities and have contributed to discrimination. The idea is to increase access for business owners who get left out of traditional bank lending systems.

Less access to capital means less opportunity to grow a business, leading to less representation of Black, Latino and Indigenous groups in Arizona entrepreneurship. 

“This loan is so unique. All we have to do is be ourselves, tell our truth.”

Katrina Calderon, owner of marketing agency Regal Fierce Media.

Overcoming disparities

When Calderon asked her husband and a friend to start a marketing agency with her, they said “hell yeah.”

She was ready to put her communications skills and her community network to work for her and become an entrepreneur. She launched Regal Fierce Media in January 2020 as a side hustle.

But when it came time to borrow money to grow her business into full-time work, she couldn’t find any “Hell yeahs! Or even any “Maybes.”

Local businesses had paused their marketing spending during the early months of the pandemic. She didn’t have enough credit history to get approved for a credit card. She didn’t qualify for a PPP loan (Paycheck Protection Program) from the federal Small Business Administration.

She didn’t trust that banks would work with small businesses “like they say they will.” The application process was complicated and overwhelming and she felt a fear of rejection well before a bank told her she didn’t meet their traditional lending criteria.

It felt like a series of defeats.

Then she heard about the BIPOC Loan Fund. She looked at the list of people involved and realized they were all people she knew in her community.

“They have all seen me grow in this community as a young entrepreneur, as someone who never gives up on their dreams,” Calderon said.

The application involved answering questions by video, which seemed made for her.

“This loan is so unique,” she said. “All we have to do is be ourselves, tell our truth.”

She felt relieved when she applied and got approved.

“When you’re a business owner who has never received any support financially, it blows your mind,” Calderon said.

She borrowed $10,000 and used it to buy a new video production camera, lenses, lights, and storage. She found she was able to compete with bigger marketing firms for bigger clients. And she landed new customers, growing her business enough to pay herself, her husband, their friend, and more BIPOC content creators in her network.

“That’s the power of opportunity,” she said. “That’s the power of perseverance. We were able to grow our business.”

‘We forget to see the people’

The BIPOC Loan Fund grew out of the CIC’s interest in taking action to support business owners of color following the murder of Floyd in Minneapolis in 2020, when calls swelled for racial justice and equality, as well as accountability in policing and other systems that disproportionately harm and discriminate against people of color.

The CIC staff started a loan fund by pooling their own personal donations.

The BIPOC Loan Fund is managed by a committee of eight BIPOC community members who have never been involved in the lending industry. They looked at new ways to qualify people for loans.

“Not only are we democratizing capital, we’re democratizing what the world says lending should be,” said Raymond, a committee member.

Raymond wears many hats in this community. She is Director of Programs and Access to Capital at Startup Tucson, Interim Executive Director of the Tucson Urban League, and she runs Blissful Creatives, a business strategy consultancy with a focus on funding and capital.

The committee chose character-based lending as a model to try.

“So we want to know more about you, we want to know about the business that you’re running, and how your business impacts the community, and also what does your business mean to you,” Raymond said.

For Cortnie Smith, one factor was her involvement in cooking meals for homeless and hungry people.

Smith, a Black woman, started her catering business Cookinwitcort after she left a career in the nonprofit sector.

It started as a side-hustle when she was preparing healthy lunches and delivering them to clients’ offices and selling her Tucson-famous baked macaroni and cheese as a side dish for Thanksgiving meals.

She was doing it all from her one-bedroom apartment and trying to figure out how to pay her bills. Meanwhile, she was also preparing “community feasts” of full Thanksgiving meals that she would pass out at parks using community support from a crowdfunding campaign.

Feeling the love from the community, she prepared a series of videos filmed at her kitchen table as her application for the BIPOC Loan Fund. With the money she borrowed, she bought a tablecloth with her logo on it, catering dishes that can keep food warm during events, and a grill and griddle to cook at pop-up events. She also took classes and learned to read a balance sheet and analyze her business liabilities.

“I set myself up in a good position to feed more people and do more events,” Smith said. 

The application process involves access to the committee members for support. The process is more transparent and accessible by design, Raymond said. They wanted the application to feel like a conversation over coffee, she said.

“When we’re thinking about democratizing capital, we’re thinking about throwing everything the system has put in place in the trash and bringing something fresh and new that’s accessible for everyone, no matter what color you are,” she said.

The committee eliminated lending jargon — which Raymond said is a huge barrier — and offered multiple ways to apply, including by submitting a video.

“The system is broken, and so all we see is dollar signs and numbers and we forget to see the people,” Raymond said.

Hurdles and history

It took a nationwide recognition of racism and how it seeps into systems in the U.S. for the BIPOC Loan Fund to happen, but it’s not merely a crisis response, Raymond said.

There’s a long history of inequitable access to capital for entrepreneurs of color.

“The lending system was not made for people of color,” Raymond said. “It was made to leave them out.”

A lot of BIPOC people start businesses out of necessity, Raymond said.

It’s the way they provide for their family and they may not have other opportunities to make enough money, she said. At the same time, BIPOC people may not have collateral or credit that meets the criteria of traditional lending institutions.

Lauren Ruffin is a Phoenix-based futurist and researcher who is thinking about how to capitalize creative entrepreneurs in the creative economy. She has been researching character-based lending programs around the U.S. for about a year as a National Field Leader in Residence at the Herberger Institute at Arizona State University.

She plans to launch a character-based loan fund in New Mexico. She is also the co-founder of Crux, a cooperative of Black artists who work in AR and VR.

Credit scores are not an accurate representation of how people spend money, Ruffin said. For example, if someone has paid their rent on time for many years or has been paying bills using an app like Venmo, that’s not being captured in a credit score, so banks don’t see records of these good financial habits. 

Additionally, BIPOC people’s credit scores were more impacted during the pandemic, she said. 

And BIPOC business owners sometimes face outright discrimination and racism.

“I’ve seen a lot of people being denied walking through the door, denied because of their name,” said Raymond.

As a Black woman, she used the name Kay instead of Keneshia 10-15 years ago because she thought it sounded more White and attractive than Keneshia in the White community where she worked, she said.

There’s history at work, too. 

BIPOC people who have had hostile experiences with the banking system take themselves out of the system, Ruffin said. 

Business owners of color may think a bank will say no even before they give them a chance to say no, so they take themselves out of the running, Raymond agreed. 

“There are so many barriers against you,” she said.

Why character-based lending works

Character-based lending may be a fairer system and could even repair some past harm, Raymond and Ruffin said.

“As people of color, we don’t want to ask for handouts, we’ve never asked for handouts,” Raymond said. “We’re asking for what you would give other people to help them grow their business and we know that we can pay it back.”

The BIPOC Loan Fund isn’t about “saving” BIPOC businesses, it’s about economic development and growth in the community, she said.

The business owners use the borrowed money to buy equipment, get training, or buy inventory and supplies needed to grow their businesses.

Character-based lending programs also have much lower default rates than traditional lending programs, usually less than 1 percent compared to 4-5% for traditional consumer loans, Ruffin said.

That’s “largely because you’re building a relationship with folks, so it’s almost impossible for them to default unless they stop talking to you,” she said.

If it seems like someone might miss a payment, a character-based lending program asks what amount the business owner can pay, what support they need, how they can connect with resources and more. 

“It’s a whole different way of thinking about lending,” Ruffin said.

There could also be a shift needed in the way society thinks about small businesses, she said. Making enough money to support a family should be a valued metric of success — not just when a business is growing and scaling up.

Real harm is done when a bank denies a small business owner access to capital, from feeling despair to feeling like you’re not a valued member of the community, Ruffin said.

Character-based lending may repair some harm, she said, by shifting to systems in which people know going in that someone believes in them and their expertise in their business.

“With all this character-based lending work that’s happening around the country, we’re getting back to how we’ve always done things. It’s not new,” Ruffin said.

It looks more like how community lending looked before the banking crisis of the 1980s, when people were more likely to know a banker who lived and worked in their own community. 

“What we’re really trying to do is get back to a way of being that’s actually healthier for us as a community and as a society,” she said.

Getting to yes

There are some limitations with character-based lending, including some of the same limitations traditional lending programs have.

Due diligence is needed, Ruffin said. Sometimes character-based lending programs, as with all loans, see applicants who don’t keep books or whose books are a mess, she said. Sometimes some remedial training can help, but it’s not always possible. (Banks may turn those applicants away.)

Raymond said the Tucson BIPOC Loan Fund often provides support and education before the committee can say yes, Raymond said. Some business owners need to register with the state as an official corporation. Others need to open a business bank account and learn to read financial statements.

“We don’t say ‘no,’ we say ‘not now’ and let us help you get ready” to apply again to get a ‘yes,’ Raymond said.

Another factor is the microlending aspect. The BIPOC Loan Fund can lend up to $10,000 and some businesses need more than that.

Growing dreams and jobs

Alana Solís, a Latina entrepreneur from Marana, was interning with Calderon when she learned about the BIPOC Loan Fund.

Solís is growing two small businesses while working part-time as a cook and taking business classes at Pima Community College. The 25 year old has worked 2 jobs, sometimes earning $7.25 an hour, since she was 15. She helps support her mom and nephew. 

The hustle is strong with this one.

Two years ago she helped her girlfriend, Paulina Delgado, start a bakery business, Pau’s Pan Dulce.

The two met in high school, worked in restaurants together, and took a lot of pride in their work.

Delgado had been laid off from a job and wanted to try putting her 10 years of baking experience to work for herself. They decided Delgado would bake cinnamon rolls, zucchini breads and other goodies, and Solís would sell them using social media. 

“We’re going to make it happen, we can do this, we got this,” Solís remembers thinking.

They sold out all of their inventory of baked goods in one day and the momentum never stopped.

They used some unemployment checks to start the baking business. They bought a chalkboard, a tent and a table for a booth at markets, plus big 50-pound bags of flour and food-grade storage bins and racks.

Then Solís thought, “if I can do this for you, I can do this for me and for us, so we can work together, like have the spicy and the sweet.”

She had learned from her tias in Hermosillo how to make chamoy from scratch from tamarind, sugar and spices. She noticed chamoy was becoming a trendy snack on social media and she thought her own recipe could stand out as “true chamoy.”

She came up with an “Americanized” version with more sugar to make a thicker syrup that can coat candies, drizzle onto fresh fruit, rim cocktail glasses, and flavor cacahuates (candied peanuts).

Now she sells chamoy snacks through her own business, Dirty T Tamarindo. 

She makes her products side-by-side with her girlfriend on a kitchen island.

They felt discouraged when they looked around for resources to grow their two food businesses.

Solís said she didn’t think she could qualify for a loan, what it would take, where to go or who to ask. She set up a business bank account but was told she can’t apply for a loan until she’s been in business for at least two years.

She learned everything she knows about business from books and online research. “We had to find out everything so slowly and little by little,” which was stressful, she said. She learned about filing documents with the correct state agencies and meeting all the regulations to operate a food business from a home. There have been times when she has longed for a mentor to turn to.

People don’t always take them seriously, even though they’re making money, Solís said. They’re young, they’re women, they’re LGBTQ, they’re Latina — and they’re short, she adds with a grin.

She thinks about discrimination a lot. “I’m seeing it. I think about it all the time,” she said. “What if there was a different face on my business? Would people be more willing? How much more willing would people have been if we looked different?”

Plus, it’s not part of her culture to ask for financial help, she said. 

So when Calderon told her about the BIPOC Loan Fund, she was surprised and a little emotional. “They’re looking for us,” she thought.

The partners plan to each apply for a loan. They dream about building websites that can handle e-commerce, adding a carreta (candy cart) for Solís so she can sell her fruit and candy products at parties and events, and eventually a retail space for Delgado’s bakery.

They have a vision that these small businesses will become their main sources of income and create generational wealth for their families. And one day soon, create new jobs in Tucson for other BIPOC and LGBTQ people.