Rocket Community Fund hopes to bolster minority contractors in Detroit
Detroit — A $10 million pilot program launched Tuesday by the Rocket Community Fund and several partners aims to address the disparity of minority contractors in the state's largest city.
The Motor City Contractor Fund was created to increase minority lending and provide resources to help Detroit-based contractors compete for billions in annual commercial construction projects, Bill Emerson, vice-chair of Rock Holdings, said at Tuesday's announcement at State Savings Bank.
Detroit lacks minority-owned contractors. Of Metro Detroit's roughly 1,300 contractors, 66 are based in Detroit, and 48 are minority-owned, Emerson said.
"It's simple, only 5% of the contractors in Metro Detroit are based in Detroit and more than $5 billion in annual commercial construction that happens in Detroit is wealth that is leaving the city and leaving the Black community," said Emerson, adding the program will serve as a future model for greater economic mobility.
"Their success will result in the hiring of more Detroiters as well as inspire the next generation of contractors to participate in the program and become equipped with all the tools that they need to succeed."
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The Rocket Community Fund is fronting the first $1 million and partnered with Community Reinvestment Fund USA, Invest Detroit and Detroit-based Barton Malow Builders to provide an additional $9 million to 20 minority contractors.
In addition to loans, the program will help contractors with access to financing, partnerships, technology and business advisory services.
The city "can simply not keep up with the demand" for rehabilitation, repair and new construction that is consistently growing in the city, said Nicole Sherard-Freeman, executive director of Detroit's workforce development. She said the partnership will increase access to jobs for residents.
"We need contractors to do this work and there are no contractors we would rather work with more than Detroit-based, minority-owned, women-owned contractors to rebuild this city," Sherard-Freeman said. "This takes a hammer to one of the biggest problems we have in Detroit, which is access to no-cost or low-cost capital, access to technical assistance... to contractors who have historically been closed out to opportunity that is available in the city right now."
Jason Barnett, senior vice president of lending with Invest Detroit, said minority-owned contractors have typically been turned away from traditional lenders. When they receive loans, they're often at higher interest rates, which prevents their ability to grow, he said. The Motor City Contractor Fund is tailored to work with contractors on every level, he said.
Each contractor is allotted a maximum $300,000 loan, which is not credit-based, at a 7% interest rate that needs to be paid out to construction projects within one year and paid back within two years. Each participant in the program will also receive a $5,000 grant from the Fund and technical assistance from LifeLine Global Consulting Services.
"Access to capital and education go hand-in-hand and this program was created with that in mind," Barnett said. "The disbursements will be tied only to the projects they have lined up."
The program is starting with 20 contractors but hopes to serve 300 contractors in the next three years. Officials said $30 million to $60 million in additional funding is needed for a sustainable program without the additional services provided by nonprofits.
"We don't want to see small business contractors stretching their finances to the limit in pursuit of growth," said Krysta Pate, vice president of economic and social justice with Community Reinvestment Fund USA. "With MCCF, we can help get contractors on more solid financial footing and position them to take advantage of all the business opportunities present in the City of Detroit today."
Officials will choose the 20 contractors based on the number of years the firm has been in business, the number of employees and the project the money will be used for.
Dr. Nicole Parker, CEO of LifeLine Global, said she's heard common themes from contractors. They need help qualifying for contracts, building new relationships with larger firms, and overall, "a cheat sheet" to get ahead.
"Most entrepreneurs know how to get their business started but don't know how to do the business side of business. That was me 16 years ago, when at the time, I was the only minority woman franchisee for auto shops in Detroit," she said. "The educational hub includes training in accounts receivable, business and growth planning, contract management, contractors qualification, labor management, legal aspects of construction, proposal development, safety training, social media suppliers and more aside from access to capital."
10% of $500 million promise allocated
The program is a component of an ongoing $500 million joint philanthropic commitment made last March between the Rocket Community Fund and Gilbert Family Foundation. The Rocket Community Fund is the philanthropic arm of Rocket Companies, while the Gilbert Family Foundation is the personal foundation of Dan and Jennifer Gilbert.
Of the $500 million, the Rocket Community Fund and Family Foundation have spent $50 million, double what they expected in the first year, Emerson said Tuesday.
"We are just getting started," Emerson said.
Over the past year, the fund invested $23 million in Detroit including, $7.6 million in housing-based initiatives, $8.4 million in employment and $5.9 million in public life investments. The Gilbert Family Foundation invested $11 million in Michigan State Apple Developer Acadamey and $15 million in the Detroit Tax Relief Fund.
In November, the Fund announced it would partner with consumer credit reporting firm Experian on reducing door-to-door canvassing, instead reaching out by phone to 50,000 Detroiters at risk for home foreclosures. It also paid the delinquent property taxes of 4,500 Detroit homes with another 2,000 homes in the pipeline.
"With every investment, we are taking the time to listen, to learn, and take time to reflect," Jennifer Gilbert said in a video played at the event. "I truly believe that our best work is still ahead."
Deana Neely, founder and CEO of Detroit Voltage, has been chosen for the program. She said it will help her take on multiple projects in tandem to scale her company with mentorship and access to capital. Detroit Voltage provides residential and commercial electrical installation, repair, remodeling and renovation services.
"It's extremely difficult for minority contractors to compete for a sizable project without access to capital," Neely said. "When my business was started, I bootstrapped it using personal credit cards to cover jobs and business expenses. Unfortunately, financial hardships followed and I simply couldn't afford it... This will allow me to take on projects without using my personal savings to do so and the access to on-demand training will be a key part of keeping me in my role."