Tucson-area small businesses unable to get traditional commercial loans can tap a new source of capital, thanks to two local nonprofit organizations.
The Tucson-based Community Investment Corporation and Startup Tucson, have partnered with the national community-based economic development group Common Future to offer a total of $500,000 in alternative loans.
Launched this week, the Success Through Alternative Capital (STAC) program aims to help businesses without adequate collateral or assets to qualify for traditional loans.
Interested businesses should contact Community Investment Corporation online at cictucson.org/stac.
California-based Common Future is investing $250,000 in the pilot program through its in-house investment entity, Community Credit Lab, while the CIC is matching with $250,000 of its own funds. Startup Tucson is providing business and entrepreneurial education to support local business owners who access STAC funding.
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The program uses revenue-based financing, allowing small businesses to pledge future revenues for an advance of financial capital, with payments varying depending on how well a business is doing and its gross revenues.
The STAC program is expected to fund 25 local businesses over the next year, the CIC said.
Payments are higher when the businesses are generating more revenues, and lower when they are generating less revenues — an especially helpful arrangement for seasonal businesses, CIC said.
The program will use Ned, an online revenue-based lending platform, to streamline applications, qualification and disbursement activities, and to automate revenue-based repayments, the CIC said.
CIC Executive Director Danny Knee said the economy works well for those who have assets to pledge as loan collateral.
“But the over-reliance on asset-based lending without complementary alternatives makes it nearly impossible for many small businesses, and especially those run by entrepreneurs of color, to get the financial capital they need to grow and succeed,” Knee said.
Liz Pocock, CEO of Startup Tucson, said the program is an effort to make the local economy more inclusive.
“We believe revenue-based financing is a way to support emerging entrepreneurs, including entrepreneurs of color,” Pocock said in prepared remarks.
Contact senior reporter David Wichner at email@example.com or 520-573-4181. On Twitter: @dwichner. On Facebook: Facebook.com/DailyStarBiz