In Detroit, a city with multiple flagship construction projects underway and a housing stock in need of repair, a new program aims to solve the challenges faced by minority-owned contractors.
What Happened: The Motor City Contractor Fund was announced Tuesday by the Rocket Community Fund, the philanthropic division of Rocket Companies Inc (NYSE:RKT); the Community Reinvestment Fund, USA; Invest Detroit; and Barton Malow Builders.
It’s kicking off as a $10-million pilot program that will begin by assisting 20 Detroit-based contractors with loans and supportive services in order to address historic inequities such as access to capital and the digital divide.
“We’re here to address a long-term systemic problem. Minority-owned contractors have historically been turned away from traditional lending institutions,” said Bill Emerson, vice chairman of Rock Holdings, Inc. “This issue intersects with the fact that until last year, Detroit was the least digitally connected city in the country.”
The Rocket Community Fund is investing the first $1 million for the administration and operation of the program.
Only 5% of contractors in metro Detroit are based in the city itself, he said — representing a missed opportunity in a metro area that has more than $5 billion annually in construction projects.
Deana Neely, the founder and CEO of electrical contractor Detroit Voltage, said the program was designed for contractors like herself.
It’s difficult for minority contractors to compete for large projects, she said, adding that she “bootstrapped” her business by using personal credit cards to cover expenses.
“I have been turned down for funding several times,” Neely said Tuesday, speaking at a press conference at downtown Detroit’s State Savings Bank building. “Many times I h;ave been forced to turn away projects because of lengthy payment terms, upfront material costs and in some cases stringent bonding requirements.”
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The Nuts And Bolts: The Motor City Contractor Fund will offer loans that are “more situation-based” than credit-dependent, looking at factors such as the number of years in business, whether the contractor has employees and what upcoming work they have, said Krysta Pate, the vice president of economic and social justice at the Community Reinvestment Fund.
Contractors are also being squeezed by economic conditions such as inflation and supply chain slowdowns, she said.
Loans will be made at a fixed interest rate of 7% to contractors to cover one year of projects in the firm’s queue, and contractors will have two years to pay back the loan, she said.
“Compared to using cash or high-interest credit cards, I think we’re starting in a good place.”
When the contractor fund scales up, Pate said the goal is to service 300 to 400 contractors with a pool of between $30 million and $60 million in funds.
“With the Motor City Contractor Fund, we can help get contractors on more solid financial footing and position them to take advantage of all the business opportunities present in Detroit today. We will give contractors the tools they need to bid smart, grow smart and borrow smart.”
A Continuing Investment In Detroit: Tuesday’s announcement is the latest development following the March 2021 commitment by Dan and Jennifer Gilbert’s nonprofit Gilbert Family Foundation and the Rocket Community Fund to invest $500 million in Detroit neighborhoods over 10 years. Dan Gilbert is the founder and chairman of Quicken Loans and the Rock Family of Companies.
The initiative began with a $15-million commitment by the Gilbert Family Foundation to pay off delinquent property taxes for about 20,000 Detroit families.
The Detroit Tax Relief Fund has so far assisted more than 4,500 families, with another 2,000 in the pipeline, said Emerson.
The Gilbert Family Foundation and Rocket Community Fund have invested almost $50 million since making the pledge to Detroit, he said.
“We start by investing in stable homes. To achieve economic mobility, we then build on that foundation and build on entrepreneurship, job growth and skills attainment.”
Deana Neely, founder and CEO of electrical contractor Detroit Voltage, speaks Tuesday at the launch of the Motor City Contractor Fund. Photo courtesy of Rocket Companies.
