Eric Foster credits a 2015 report from Forbes.com that ranked Grand Rapids as 51st out of 52 markets in the U.S. economically for African Americans for helping to cement his idea to create Rende Progress Capital.
Foster launched the organization four years ago to support entrepreneurs of color with small business loans and other support. Since its formation, Rende Progress Capital has provided capital to nearly 40 minority entrepreneurs, most of whom remain in business and are growing their companies.
A federally designated community development financial institution (CDFI), Rende Progress Capital works to help entrepreneurs of color overcome barriers to accessing capital, including racial biases, and eliminate the racial wealth gap.
“That’s why we were formed,” said Foster, co-founder, chair and managing director for Rende Progress Capital who was “embarrassed and frustrated by certain things” such as the Forbes ranking years ago.
The best way to effect change was through supporting entrepreneurship by people of color, he said.
“I just recognized the fact that we can’t move away from that embarrassment if we’re not creating economic equity in general and business ownership specifically,” Foster said. “Our lending eliminates barriers to capital access and eliminates the documented racial wealth gap that we want to close by financing business owners and business ownership because it’s a recognized solution to the documented racial wealth gap problem.”
Of the businesses in Rende Progress Capital’s loan portfolio, 70 percent are owned by entrepreneurs who had never previously secured a business loan from any type of lending source. That’s an indicator that existing businesses owned by people of color “have been overlooked by some conventional institutions,” Foster said.
Rende’s first loan in 2018, made jointly with Marquette-based CDFI Northern Initiatives, went to Reliable Medical Transport LLC, an African American-owned company in Grand Rapids that does non-emergency patient transports.
One of the subsequent loans went to Soldadera LLC, a Grand Rapids producer of cold-brew coffee that started in early 2018 “like a hobby,” said Mario Rodriguez-Garcia, the company’s CEO, or “coffee energy officer,” who previously worked as an automotive engineer. Inspired by his grandmother’s recipe for cold-brewed coffee, Rodriguez-Garcia and his sister, Gabriela, started Soldadera as they continued to work full-time jobs.
Soldadera began by “testing the waters” and going to festivals and other events, he said. In 2019, after winning several competitions, the company got picked by SpartanNash Co. “and we saw there was something to this,” Rodriguez-Garcia said.
To support growth, the company approached Rende and secured a $25,000 loan that paid for a rebranding and repackaging project that “opened a lot of doors for us,” he said.
“That was a crucial moment within the company. Their help and capital helped us to revamp to get us to a new stage,” Rodriguez-Garcia said. “It opened a lot of opportunities for us.”
Soldadera coffee, sold in 12-ounce cans, was later picked up by Meijer Inc. for sale in 13 stores. The company was first introduced to Meijer through Start Garden, which works with Rende to assist loan clients.
Meijer has since extended Soldadera’s products to 112 stores, Rodriguez-Garcia said. The cold-brewed coffee also is sold at Sam’s Club outlets and Grand Valley State University campus stores, he said.
Housed and producing products in incubator space at the Grand Rapids Downtown Market, Soldadera now is sold in six Midwest states. The company is working to raise $500,000 in additional capital from investors to support further growth, prepare a permanent production and packaging location, expand to new markets, “and from there the sky is the limit,” Rodriguez-Garcia said.
Sales are beating projections and, after onboarding at Meijer stores in June, could hit $1 million in 2023, he said.
More than capital
Rende Capital Progress receives funding from the U.S. Department of Treasury’s CDFI Fund; community, family and corporate foundations; corporations; and six partnering banks that all “understand and embrace social equity,” Foster said.
In addition to capital, Rende Progress Capital couples loans with technical support and business coaching for borrowers. The organization partners with organizations such as Start Garden, SpringGR and the Small Business Development Center for technical assistance such as strengthening accounting systems.
Rende as well provides pre-loan readiness support to prepare them to take on the debt. Grand Rapids law firm Miller, Johnson, Snell & Cummiskey PLC also provides a “very generous” level of pro-bono legal services to Rende clients, Foster said.
The technical support loan clients receive “is just as or more important than the loan capital,” he said.
In the last two fiscal years, Rende has had multiple clients report employment growth, Foster said. Since founding in 2018, some clients have reported annual revenue growth between 10 percent and 20 percent or higher, he said.
“We show if you give people a chance they can perform,” Foster said.
Addressing racial bias
Foster and co-founder and General Manager Cuong Huynh created Rende Capital Progress as a project while serving as fellows at the Battle Creek-based W.K. Kellogg Foundation.
In focus groups prior to launch, and in talking with prospective borrowers in the loan application process, business owners who are people of color told Rende’s organizers that they had “either a real experience of racial bias by some actors or a perceived (bias),” Foster said. In one pre-launch focus group, 43 percent of participants said they felt they had a bank loan request denied because of racial bias, and one in five believed they had been denied specifically because of racial bias, he said.
Foster cites past U.S. Department of Commerce data that show businesses of color, even when they are creditworthy compared to their white peers, are three times more likely to have a loan request denied.
The Department of Commerce Minority Business Development Agency concluded in a 2010 study that “inadequate access to financial capital continues to be a particularly important constraint limiting the growth of minority-owned businesses.”
The lack of access to capital or underfunding a business can result in minority owners using too much of their personal capital. Some even “just walk away from the market and close their business because they can’t find capital,” Foster said.