How a Mississippi nonprofit helps Black entrepreneurs get funded

How do you start a business when you don’t have anything to use as collateral? In most cases, the answer is simple: You can’t — a bank won’t lend you the money. Higher Purpose Co., a Mississippi nonprofit, is working to change this for Black Mississippi Delta business owners.

In a state still reckoning with the legacy of slavery and Jim Crow-era economic inequities, the organization assists over 500 Black-owned businesses — 87% of which are run by Black women — by acting as an advocate and “capital matchmaker” to promote ownership and economic justice, said founder and CEO Tim Lampkin. Financial support mechanisms are one of its offerings. They aim to reduce the barriers that exist at financial institutions, which have historically been a barrier to Black business development.

“We’re able to help entrepreneurs get access to zero-interest loans that don’t require any collateral, that don’t require any minimum credit score,” Lampkin said in an interview with Marketplace’s David Brancaccio. “Because we know, particularly when we’re working with Black-owned businesses, the collateral and credit score [requirements] are two main issues that stop Black-owned businesses from going after the capital that they need.”

Here is an edited transcript of their conversation.

David Brancaccio: You may have attended these things — I once attended a [Small Business Administration] training on how to be an entrepreneur, and the guy on the stage looks at all of us and yells, “Where are you gonna get your startup money? And don’t say your parents!” I mean, startup money is hard. And what, in your experience, it’s harder for some groups of people?

Tim Lampkin: Absolutely. When we look at the work that we’re doing, particularly here in Mississippi with Black-owned businesses, we know that when it comes to access to capital, there are so many different barriers. And so we’ve been working very hard over the last six years to break down some of those barriers. In the last 2½ years, we’ve been able to deploy over $1 million of capital to Black-owned businesses in Mississippi. And so we’re really excited about that, and really trying to change the narrative around how access to capital is approached here in Mississippi, but [also] All across the country

A “buffet of capital options” for businesses

Brancaccio: How can you raise the money for this? It’s about, in part, matchmaking, right?

Lampkin: We consider ourselves to be a capital matchmaker. What I call “capital matchmaker” is what we have [as] a buffet of capital options, where we’re able to really meet the entrepreneur where they are. We have grants, zero-interest loans through Kiva partners, as well low-interest loans through community financial institutions. Venture capital is lower down in the capital stack. And so we’re able to really bring a unique approach to this process. And working with those entrepreneurs, we are able to raise grant funds that we’re able to re-grant out to businesses, and then as well as leveraging the capital that the different financial institutions have to really match that with the entrepreneur.

Brancaccio: Kiva partners was mentioned. That’s a separate organization, a nonprofit in itself.

Lampkin: So we’re the only Kiva hub in the state of Mississippi. So we’re able to help entrepreneurs get access to zero-interest loans that don’t require any collateral, that don’t require any minimum credit score, because we know, particularly when we’re working with Black-owned businesses, the collateral and credit score [requirements] Two main obstacles prevent Black-owned businesses obtaining the capital they need. Kiva’s assistance has been invaluable in helping our entrepreneurs access this type of capital.

Overcoming systemic barriers

Brancaccio: Underlying all of this is that a traditional source of capital — borrowing from a bank — there may be structural problems in that system, right? You believe that banks still use discriminatory criteria against potential buyers, including people of color.

Lampkin: We’ve seen in the last 2½ years, particularly since the pandemic hit, several financial institutions have been more creative in terms of their lending criteria. Then, it started to creep back into traditional criteria. The pandemic demonstrated that there are many options for repayment structures and interest rates. Even if we take into account closing costs, capital becomes more affordable. But, that collateral element has proven to be a real barrier for many Black-owned companies. As a result, we have our own loan guarantee pool which we use to provide collateral. So if a person doesn’t have collateral, we’re able to basically reduce the risks for the borrower as well as the lending institution by guaranteeing that loan up to 50%. So if something happens to that loan, you know, it’s still a win-win situation for the financial institution. And so we’re seeing some progress in many financial institutions and how they’re working with entrepreneurs to create new products. But there’s still a lot of work to do in this space as we continue to really use capital access as a way to open up business ownership for so many, particularly here in Mississippi as it relates to Black business owners.

Brancaccio: This network of funding is only one thing. Are people also able to lend their expertise or provide guidance? Does that count as part of the network?

Lampkin: Absolutely. So, our model includes education and advising as well as funding. We have quarterly meetings with 500 of our members in the state. Then we do monthly meetings with entrepreneurs. And then we bring in trainers, speakers, and facilitators to help them. Then we do one-on-one advice with entrepreneurs depending on their stage in the business. Finally, we wrap it up with the financial part. Capital access. So it is very much so a unique model within itself, and we’re creating this three-pronged approach where we’re able to meet the entrepreneur no matter where they are in the stage of their business because that’s very critical. You don’t have the guidance to know how to use your capital or how to spend it. And so it’s really critical that we pair that capital with advising and continue to provide that ongoing education and support with those entrepreneurs. And you know, making sure that we’re with them every step of the way.

Brancaccio: I have a “brain drain” question, Mr. Lampkin. You’re from Mississippi, I understand. There were probably other options. But you chose to remain in Mississippi and serve your state, not move to the top.

Lampkin: Absolutely. So I believe that purpose is important. And I truly understand that this is the work that I’ve been called to do at this particular time and at this particular place. It is often the case that, especially for millennials, there are more opportunities in bigger cities. This can make it more lucrative in terms of money and finance. But is this really what you want? It’s amazing to have this opportunity. That work is also paid. [as] I can see the direct effect on my community. And it’s really also about leaving a legacy. And so I encourage anyone that is listening to this that is on the fence of struggling with how they can get involved or stay involved with their hometown or their community, there’s ways that you can do that, there’s ways that you can find a problem and then be a part of the solution. And that’s what I did with building Higher Purpose Co.