By: Taylor Sharp and Craft3
Seattle Foundation and Craft3 are partnering once again to address the profound and enduring racial wealth gap in King County with an impact investment and/or donation opportunity. This is an opportunity to put capital as well as technical assistance to work for entrepreneurs of color in King County, with the goal of lessening the racial wealth gap, supporting job creation, and expanding access to economic opportunity.
In 2020, the US Census reported that median household income for a Black household in King County was $53,961 – or 52% that of a white household’s median income of $103,793. Studies have shown that people of color often have lower net worth, fewer sources of collateral, and lower credit scores – and this significantly limits access to traditional financial resources like small business loans and other traditional financial tools.
In 2010, Seattle Foundation invested $1M in Craft3 to support commercial loans to underserved business owners in King County. This investment represented one of Seattle Foundation’s original impact investments and resulted in over $3 million in Craft3 financing for more than 25 businesses and organizations, including those in the clean energy and technology, daycare, retail, restaurant, and professional services sectors. In the 13 years since Seattle Foundation’s initial investment, Craft3 has invested more than $112M in King County, including $95M through 275 commercial loans to small businesses and nonprofit organizations.
Through intentional outreach and relationship building in communities of color in King County, under its Equitable Lending Initiative, Craft3 has reimagined its underwriting and loan applications processes as well as its business services. Specifically, Craft3 made the following changes:
- lowered credit score requirements.
- allowed for higher personal debt-to-income ratios.
- stopped requiring any personal collateral for loans under $150,000.
- reduced interest rates to 3-5% fixed (currently priced at 5.0%).
- waived loan fees, typically 2%, and reduced closing costs to a flat $200 fee.
- awarded “credit” for years in business.
- allowed for up to three payment deferments over the life of the loan.
In addition to making its loans more inclusive, Craft3 expanded its technical assistance, education, and coaching services. Craft3 provides entrepreneurs of color one-on-one coaching and loan readiness support, in Spanish and English, in the areas of cash flow projection coaching, business plan review and feedback, goal setting and commercial loan application support. Craft3’s Business Services also include referrals to a network of culturally competent professional service providers, with subsidies for low-income entrepreneurs. Entrepreneurs of color are offered free access to an online leaning platform with templates, calculators, and videos and guides in English and Spanish, on topics including startup, money, marketing, and management. Since mid-2021, Business Services has provided one-on-one business coaching to 100 clients, of which 28 are in King County.
In partnership with Craft3, Seattle Foundation is offering an opportunity for philanthropists to transfer assets in their personal Donor Advised Fund into its Equitable Lending Initiative through impact investments and/or a tax-deductible donation to support entrepreneurs of color in King County. The initial goal is $500,000 in pooled investments and/or donations, to match the Foundation’s investment commitment of $500,000. However, based on strong demand for these loans and services, from entrepreneurs of color in King County, Craft3 can accept investments and donations in excess of this amount. The deadline to transfer assets is December 8th.
To learn more about Craft3 or how you can get involved in impact investing, please contact Taylor Sharp.