Pittsburgh ranks last among 50 metropolitan areas nationwide in the percentage of businesses owned by a black entrepreneur, according to a Analysis of February 2022 of the LendingTree online borrowing platform. And one of the main reasons, say observers, is that minority and women-owned businesses lack access to capital. The Urban Redevelopment Authority of Pittsburgh announced two new pilot programs, and a total of about $5 million, to help address this inequity.
“It takes money to grow your business,” said Thomas Link, the agency’s chief strategy officer. But URA officials have seen a gap in the city’s business ecosystem: There’s a lack of what Link called “venture capital,” meaning money that allows businessmen to take positive risks, such as hiring someone or buying more products to increase sales.
“Businesses are risky businesses and they may not work,” Link said. URA programs, he said, “are meant to sit side-by-side with entrepreneurs and take risks with them.”
The URA board will vote on Thursday on two schemes to benefit minority and women-owned businesses, known as “MWBE” corporations.
The first is called URA Ventures and has three distinct investment streams, the first of which is “Mainstreet Ventures”. Small businesses can apply for loans of up to $100,000 at an interest rate of 3%, which the URA will allow to be repaid as the business generates revenue. The second path is called the “Pittsburgh Entrepreneur Fund 2.0”. MWBEs in innovation and technology – “it’s a broad classification,” Link said, and by design – can apply for loans of up to $125,000 at an interest rate of 8 %. Again, the URA could see its return through company profits, or when the company is sold or attracts new investment. The third way is called “Venture Co-Investment”, also for technology and innovation companies. The URA would become a limited partner in existing investment funds that are either managed by MWBE or whose objectives match those of the agency.
During the pilot project, the URA wishes to invest up to $750,000 in this latter avenue of investment. Link said URA money should go to Pittsburgh-based businesses.
The second URA initiative will be called the MWBE Developer Equity Fund. The URA would invite female or minority developers to apply for up to $500,000 to fund a development project. Link said there’s an old quip in real estate: “How do you make some money in real estate? You have to have a lot of money. »
He added, “Some developers have great plans…that meet both the mission and a reasonable expectation of economic return,” but they don’t have the funds to secure a loan or attract other investors to ultimately make the deal work. Ideally, the money set up by the URA will help MWBE developers create neighborhood-identified benefits, such as the rehabilitation of an important community structure, the creation of affordable housing or jobs. In particular, the URA will seek developers and projects Paths of Hopecommercial corridors in seven of Pittsburgh’s historically black neighborhoods.
It’s important to the city and the URA to support people and projects that “make the neighborhoods we serve reinvigorated and have more of the things they want and need,” Link said.
Also on Thursday, URA board members are expected to vote to create a new fund that could take advantage of new market tax credits to help underwrite new investments in Avenues of Hope.