Once a small business lands a contract, this San Diego lender helps them finish the job

For small businesses that want to grow and land bigger customers or contracts, it often takes money to make money. This challenge is especially evident for entrepreneurs in underserved communities who don’t have credit or other assets to bet on when approaching lenders.

That’s why Mission Driven Finance, a San Diego-based impact investing firm, has partnered with the Council for Supplier Diversity to distribute up to $10 million to minority-owned and other diverse-owned small businesses in San Diego County and Imperial County. The firm was founded in 2016 and as an impact investor it tries to create a positive social change by financing local enterprises that benefit the community.

The Subcontractor Financing Program aims to help small businesses get loans so they can carry out contracts with corporate and government clients. It’s geared toward “diverse suppliers,” which means businesses have the SBA certification as a minority-owned, woman-owned or veteran-owned business.

Lauren Grattan, co-founder and chief community officer at Mission Driven Finance said that while there are efforts to foster inclusive economic growth among local businesses, access to capital is still a challenge.

“Even with that movement, it’s not easy for small business owners, particularly entrepreneurs of color and women and service-disabled veterans to be able to grow from an idea of a business to be able to deliver on a contract for Kaiser Permanente or Sempra, or the Navy — that’s three of our large anchor institutions here — so we’re trying to smooth that out,” she said.

For example, a local business might make a deal to provide a service to the city, but they need new equipment to execute that successfully. A small business owner might not have extra cash for the equipment or the collateral to qualify for a traditional loan.

To bridge that gap in funding, impact investing firms like Mission Driven Finance use other criteria to determine how they invest in small businesses. For example, the firm doesn’t require a credit score or personal guarantees as part of the process and instead may look at the value of the contract as backing for the loan, Grattan said.

These loans to small businesses and nonprofits will range from $100,000 to $500,000 at a fixed interest rate of 8.5 percent. The new program builds on the firm’s existing Advance Strategy, which has helped groups such as Somali Family Service of San Diego get financing to provide community services for the city of San Diego.

Grattan said that during the pandemic, when there were other relief programs distributing money to help businesses stay afloat, they paused some of their lending portfolios. But, at this stage of pandemic recovery, there is an opportunity to focus on subcontractor financing to help entrepreneurs rebuild and grow.

“We’re seeing procurement has ticked up,” she said. “Our partners at the Council for Supplier Diversity and the Central San Diego Black Chamber, they’re seeing great opportunity for small businesses to be able to bid on things.”

The focus on supporting underserved entrepreneurs to grow their business through contracting has a positive ripple effect on the community, Grattan said.

“People hire from their community ... it’s not just that you supported that one business owner — you supported their workforce,” she said. “And so it’s a really big multiplier effect on being able to level the playing field and get more inclusive economic opportunity overall.”

They’re not the only “impact investing” firm around town. There are others like Accessity that also try to bridge that gap in funding for small business owners as well as SBA-backed loan programs through local banks.

There is also an opportunity for small business owners to learn more about landing bids and government contracts on Sept. 21 at Southwestern College. The region’s Procurement Technical Assistance Center is hosting an in-person event called, “Thriving as a Business in a Pandemic World (Panel & Resource Fair)” that will feature local agencies such as Caltrans, the city of San Diego, General Atomics, Port of San Diego and others.

For more information and to register for the resource fair, visit the event page.