Entrepreneur-backed Assets Fund Draws $17.5 Million in New Commitments
The Aspen Institute and the Microfinance Impact Collaborative have announced $11.5 million in new funding and $6 million in purchase commitments for the Entrepreneur Backed Assets (EBA) Fund. A first of its kind initiative, the fund aims to help community-based financial institutions strengthen their capacity to lend to small businesses owned by people of color and people in low-income communities.
The Annie E. Casey Foundation — one of several organizations committed to seeding the fund — will provide a $2 million subordinated loan. Other contributing organizations include: Wells Fargo ($3.5 million Open for Business grant); The Colorado Health Foundation ($900,000 subordinated loan and $100,000 grant; Truist Bank (a $5 million line of credit).
“We recognize the importance of supporting entrepreneurs of color and businesses in low-opportunity communities, and a proven approach to doing that is helping them obtain capital,” said Tracy Kartye, director of social investments at the Casey Foundation. “The EBA Fund has already been successful at connecting businesses with the resources they need, and the Annie E. Casey Foundation is pleased to be able to contribute.”
Beyond these funding commitments, multiple banks have agreed to purchase microloans from EBA Fund via community development financial institutions (CDFIs) through 2022. Participants include: Western Alliance Bank (up to a $5 million commitment); HTLF through Citywide Banks and Minnesota Bank and Trust (up to a $500,000 commitment), and Byline Bank (up to a $500,000 commitment).
By the end of 2021, EBA Fund will have onboarded 14 CDFI partners and completed sales to 10 banks. Of the current loans purchased by the fund, 72% are to entrepreneurs of color, 44% to women entrepreneurs and 78% to entrepreneurs in low-income communities.
The fund began in 2020 with backing from the Citi Foundation. Its design emerged from the Microfinance Impact Collaborative, supported by the Aspen Institute, which aims to identify and implement strategies to scale microlending in the United States.
Since launching, EBA Fund has removed hurdles that prevent the widespread sale of CDFI microloans and helped banks focus on maximizing value for their customers and communities while helping to address racial and gender wealth gaps.
“Small businesses drive the U.S. economy,” says Ryan Ammann, team lead for Truist Community Capital’s Funds and Alternative Investments. “Providing equitable access to capital to low-and-moderate income communities and minority-owned small businesses can spark innovation, create sustainable growth and drive reinvestment in neighborhoods across the United States.”