Bill Emerson, vice chairman of Rock Holdings Inc., announces the new Motor City Contractor Fund on Tuesday morning.
The philanthropic arm of the billionaire Dan Gilbert family and the affiliated Rocket Companies Inc. is committing $10 million to help Detroit-based contractors access a new suite of services to help grow their businesses.
The Motor City Contractor Fund, announced Tuesday morning at a media event in downtown Detroit, aims to offer “Detroit-based contractors with access to financing, partnerships, technology and business advisory services,” according to a news release.
The pilot program is a collaboration between the Rocket Community Fund, the Community Reinvestment Fund USA, Invest Detroit and Southfield-based general contracting company Barton Malow Builders. Detroit-based small business consulting business LifeLine Global Consulting will serve as the operator of the fund’s technical assistance program.
Krysta Pate, vice president of economic and social justice for Community Reinvestment Fund USA, told reporters that the initiative seeks to “start slow” with 20 contractors before building into a full fund in “no later than (one) year.”
Pate said that over time, the fund will seek to work with around 300 local contractors with a fund of between $30 million and $60 million. The loans will be structured with a fixed interest rate of 7 percent, which will help the nonprofit partners facilitating the program cover expenses.
Jason Barnett, vice president of lending for Invest Detroit, said the maximum loan made available will be $300,000 and that loans will be underwritten based on construction jobs that contractors have in the pipeline and dispersed accordingly.
“Development continues to exponentially increase across our city, which will catalyze economic impact, and it is critical that Detroit-based contractors are well positioned to be a part of that growth,” Laura Grannemann, vice president of the Rocket Community Fund, which is investing the first $1 million into the program’s administration and operations. “Detroit-based contractors have historically been overlooked, but the Motor City Contractor Fund will increase access to financing for local contractors, empowering them to grow their business and create more jobs for Detroiters.”
Contractors will be placed into one of three technical assistance curriculum categories:
- Fast Track: Emerging contractors that have projects lined up, meet most funding requirements and are ready to apply for funding.
- Fortified Track: Emerging contractors that have potential projects in the queue, meet many funding requirements and are not immediately ready to apply for funding.
- Foundation Track:Any contractors without a pipeline of potential projects or that do not yet meet funding requirements.
Barton Malow is working with LifeLine Global Consulting to provide many of the training modules, as well as ongoing mentorship and business advisory support to participants.
The nonprofit Community Reinvestment Fund is serving as the lead arranger of the program. CRF will coordinate and manage the pilot program. During the first phase, CRF will carry $8 million on its balance sheet to ensure the first cohort’s participants have access to critical financing.
“Financing is the single largest barrier to entry for contractors, and contractors of color are often only able to access high-interest financing or no financing at all,” Pate said in a statement. “By providing the critical low-interest loans for working capital, the pilot program for the Motor City Contractor Fund enables participants to have equitable access to financing and to the opportunities it affords.”
Working capital expenses typically include upfront payroll expenses, costs of goods, materials, rent, equipment rental, accounts payable and more.
The Motor City Contractor Fund will make flexible, low-interest loans to address capital needs of participating contractors including payroll expenses, costs of goods, materials, rent, equipment rental and accounts payable.
Each participating contractor will also receive a $5,000 grant to be used on expenditures for such things as credit repair, bonding capacity, developing an online presence and capabilities statements.
Invest Detroit, along with the Detroit Development Fund, Opportunity Resource Fund and CDC Finance will serve as loan originators for the program.
Prospective applicants can visit motorcitycontractorfund.org for resources, attend webinars and events, and apply to participate in a future cohort.