AltCap Expands M/WBE Contractor Support with Foundation Investment & Grant

“It's not news that tradespeople are leaving the industry at record rates," said Mike Stromberg, Senior Manager of Real Estate Development. “Minority-owned and women-owned businesses are one of many avenues to fill the labor gap, but many are struggling to get the loans or funding necessary to successfully operate their businesses."

With a two-year $200,000 grant and a five-year $500,000 program-related investment (PRI) from the Opus Foundation, minority-owned and women-owned construction businesses in Kansas City will be getting a substantial boost. The money will fund a multi-faceted workforce and community development initiative enabling AltCap, a Community Development Financial Institution, to expand its micro-lending and technical assistance to minority and women business enterprises (M/WBE).

“AltCap is providing loan funding and support so they can run their operations effectively and hopefully aspire to traditional lending sources one day," Mike said.

Providing Fair Access to Capital

As an alternative lender, AltCap provides fair access to capital for communities and small businesses unable to obtain financing from mainstream banks due to lack of credit, collateral or business longevity. Their financing products, entrepreneur-focused programming and strategic partnerships promote inclusive and equitable economic growth.

AltCap has deployed over $300 million into low-to-moderate-income communities across six states since 2010. In Missouri and Kansas specifically, they've deployed almost $35 million in financing to nearly 1,000 small business borrowers, facilitated more than $267 million in tax credit financing for 28 real estate projects and provided more than $13 million in COVID-19 relief financing, much of that before the Paycheck Protection Program hit the streets.

"AltCap is a place-based and people-based lender. We help communities in low-income census tracks leverage capital and other resources to stimulate small business investment and economic activity," said Ruben Alonso III, CEO of AltCap. “We target our lending to entrepreneurs who have had trouble accessing capital, in particular minority, women and veteran-owned businesses."

Relaunching the Diversified Contractors Growth Fund

With the Opus Foundation's support, AltCap will relaunch its Diversified Contractors Growth Fund (Growth Fund), which provides loans and technical assistance to M/WBEs engaged in the construction trades in the Kansas City region. The fund was started in 2017 but slowed considerably during the pandemic due to broader micro-lending needs and demand by small businesses.

The five-year $500,000 PRI from Opus will serve as a loan loss reserve fund for the Growth Fund, enabling AltCap to raise up to $2 million in additional loan capital from CrossFirst Bank and other lenders seeking to fulfill their Community Reinvestment Act requirements to meet the credit needs of low- and moderate-income neighborhoods.

“Program related investments are one way the Foundation is working to better align investments with Opus' mission and values – prioritizing mission over market-rate financial returns," said Kristin Ridley, Executive Director of the Opus Foundation. “Upon repayment, returned capital is reinvested to continue the social impact. It is not always necessary to award a grant to complement a PRI, but with efforts like this one, the combination can provide fundamental dollars to support a more successful implementation."

The two-year $200,000 grant is to Community Capital Fund (CCF), an independent AltCap-affiliated nonprofit organization that provides grants, technical assistance and coaching to under-resourced neighborhoods and small businesses in the Greater Kansas City metro area. AltCap and CCF frequently partner to scale the impact of their programs. The grant will underwrite the salary and benefits of a full-time employee or equivalent contractor to spearhead the technical and business development aspects of this initiative and to create opportunities for collaboration and synergy between contractors and other industry stakeholders.

Kristin said, “AltCap is taking a holistic approach to support minority- and women-owned construction businesses by making capital more accessible, addressing barriers and offering technical assistance and business development services to help them scale and thrive."

When all the pieces are in place, M/WBE contractors will be able to access a complete package through AltCap and its strategic partners: small business and micro loans, business development and technical assistance, membership opportunities at a local trade-focused co-working company and potentially better access to a surety bond product, which AltCap is hoping to develop in the next 12 months.

“We're making sure M/WBE contractors have everything they need to bid on all the work coming to Kansas City," Ruben said. “We want to ensure the growth our region is experiencing is more equitable so more M/WBE contractors can participate in that growth."

With the loan loss reserve fund now in place, AltCap is finalizing a loan agreement with CrossFirst Bank for additional capital to lend to contractors. It's also working with its technical assistance partner to cement the details of support services contractors need to successfully bid on jobs. By the second quarter of 2024, it will be aggressively marketing the Growth Fund to eligible contractors.

Growing the Capacity and Number of M/WBE Contractors

Most contractors will only need a signed construction contract to secure a loan from AltCap, reassuring they will have revenues to pay back the loan. In addition to getting more M/WBE participation on projects, AltCap aims to help five to 10 new businesses get started.

Minority hiring provisions for projects receiving public subsidies will help open doors for M/WBE contractors – and for general contractors and design-build firms. Mike cited The Darby of Briarcliff as a project that had M/WBE hiring goals. The project team successfully connected with M/WBE contractors that will also be used for future projects.

“Relative to other peer markets, Kansas City has a small population of M/WBEs," Ruben said. “We should have more given the size of the minority population in Kansas City, Missouri."

More specifically, the initiative is targeting 50 loans to M/WBE contractors in two years, including five to 10 loans to start-up businesses. The average loan size is expected to be $50,000, although AltCap will lend up to $250,000 depending on the business's need. There will also be group training sessions, as well as one-on-one technical assistance and advisory services.

Our associates will have an opportunity to contribute their industry expertise, providing insights into how to manage a construction business or bid on a contract, for example.

Mike said, “In this first year, success will be building an awareness with the businesses we're intending to help, so they can evaluate AltCap as an option when seeking funding. By the end of year two, if we help just one subcontractor get their footing and graduate to traditional lending sources, that would be a success."

Monumental Work

The Opus Foundation has worked with CDFIs in other markets, but this is a first in Kansas City. AltCap's contractor-specific fund aligned well with the Foundation's workforce development focus area.

“Having this opportunity with Opus is really meaningful," Ruben said. “The financial support allows us to lean into the work while building relationships with both the philanthropic and banking communities to advance our work."

Mike will meet with AltCap regularly to provide industry perspective throughout the term of the PRI. He's also meeting with Unified Contractors of Kansas City to help coordinate marketing and recruitment efforts as both organizations work toward the same goal.

“What they are setting out to do is monumental," Mike said. “I'm very proud of the Foundation for investing in this unique opportunity. This is a true testament to the Foundation's and Opus' commitment to stewardship."

***

The Opus Foundation, the corporate foundation for Opus, is building community for a better tomorrow by supporting projects and programs that make our communities better places to live, work and raise families. The Foundation is committed to improving conditions that disproportionately affect historically underinvested individuals and communities by focusing on early childhood education, youth development, workforce development and community revitalization. Read more about the Foundation's work. The Opus Foundation is a separate entity from The Opus Group and is led by its own Board of Directors.