City, Indy Chamber launch financing program for minority-owned businesses

The city of Indianapolis and the Indy Chamber’s Business Ownership Initiative are launching a program to provide low- or no-interest loans to minority entrepreneurs in need of working capital to bid on city contracts.

The partnership, announced Thursday at the Innovation Hub at 16 Tech, comes after a study commissioned by the city found that minority- and women-owned businesses are substantially underused in the city’s contracting and procurement processes.

Those business owners reported that contract sizes were too large for them to manage, and they had limited cash flow to be able to take them on.

That’s because it can take 60 days or longer for invoices to be paid out after a bid is won, meaning business owners would need cash on hand to pay for supplies and employees to begin the work.

The initiative, called the Growing with Accelerated Payment (GAP) Contractor Development Program, is designed to increase the ability of city-certified contractors owned by minorities, women, veterans and the disabled to bid on contracts.

The program encourages prime contractors to identify small, manageable work orders they can make available to subcontractors seeking work. Contractors chosen to fulfill those small work orders would be eligible to receive an operating lines of credit from the Business Ownership Initiative.

The program is funded by $800,000 from the chamber’s existing loan capital. The funding will help smaller businesses pay initial expenditures associated with bidding on contracts—supplies and payroll, for example—without having to put themselves at financial risk by paying them with a credit card or high-interest loan, Ian Nicolini, vice president of Indianapolis Economic Development, told IBJ.

The average loan that BOI issues is around $30,000, Nicolini said. The chamber partners with financial institutions and the city, so there could be opportunities to recapitalize should the existing $800,000 run out, he said.

“If we need to recapitalize, it will be because we’ve put so much capital in the hands of entrepreneurs, and that’s a great business case for us,” he said.

The program will also provide participating entrepreneurs with coaching and mentorship designed to help them grow and be sustainable through the Business Ownership Initiative.

“As a city, we are tasked with breaking down barriers to capital, to mentorship, and to engagement,” Mayor Joe Hogsett said in a media release.

“By providing low- or no-interest loans, businesses coaches, and the opportunity to participate in development classes offered by Indy Chamber’s BOI, the GAP program will help build a deeper and wider pool of minority, women, veteran and disability-owned businesses,” Hogsett said.

Bill Shrewsberry, who founded engineering consulting firm Shrewsberry and Associates in 2001, said cash flow is a major problem for small businesses. He said there were occasions in his firm’s early days when it could have used something like the GAP program.

“I would say that cash flow, if not the largest obstacle, it is a major obstacle. Cash flow for small businesses is very, very critical for growing and sustaining a successful business,” he said. “We had contracts at Shrewsberry but we did not have the access to capital that we really needed.”