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When Leon Araiza secured a new contract with TriMet he began planning to purchase more equipment for his company, Advanced Tribal. However, he discovered he was limited in the traditional bank financing he could qualify for.This is unfortunately true for many BIPOC contractors and the inability to access affordable capital makes it harder for these businesses to grow, thrive and even take on new contracts. To qualify for bank financing, people typically need a high personal credit score, significant equity, collateral, and a lower debt-to-income ratio. Due to long-standing racial inequities, including slavery, discrimination and redlining, many BIPOC contractors do not meet one or more of these requirements.

Araiza learned about Craft3, a nonprofit community loan fund, at a NAMC-Oregon workshop. With Craft3 he found a financial partner who understood his business and the challenges he faces. Craft3 was able to make a $100,000 term loan to Advanced Tribal so they could buy a truck and bolster their work for TriMet and a new project at Benson High School.

Araiza said he doesn鈥檛 carry a lot of debt, and the loan will be helpful to keep his work on schedule and ensure he can meet initial expenses on new jobs.

鈥淗opefully it will save me money and save the projects money,鈥� he said. 鈥淚t鈥檚 given me the confidence and comfort of knowing that resource is available. I can use it as capital to expand and grow the capability of my business and my crew.鈥�

Ana Incl谩n, a Craft3 business lender, stresses that Craft3 is different from a bank in important ways. Committed to reducing the racial wealth gap by working with BIPOC business owners, Craft3 recently overhauled its underwriting process to make loans under $250,000 more accessible. This new approval process allows for lower equity contributions, higher debt-to-income ratios, and considers years in business as business acumen and 鈥渟kin in the game.鈥� Importantly, Craft3 also offers reduced rates for BIPOC borrowers.

Incl谩n explains that lenders need to know how the loan will be used and how the business owner will pay it back. Business owners who are interested in applying for a Craft3 loan need to show that they have an ability to generate sufficient profit to repay the loan.

Craft3 provides term loans rather than revolving lines of credit, but it offers a six-month draw down period for added flexibility. Craft3 believes the best alignment with NAMC-OR members is for equipment loans. Craft3 also works to help ensure their borrowers can qualify for conventional bank financing, including revolving lines of credit, in the future.

Craft3 recently made a loan to another NAMC-OR member, Tyrone Bailey, who owns Bailey鈥檚 Construction with his wife, Senta. The $250,000 loan allowed them to buy a newer dump truck for their work on TriMet鈥檚 Division Transit Project. Like the loan to Advanced Tribal, this was also a longer-term relationship, with Incl谩n providing guidance and support over months before the loans closed.

鈥淭yrone called me on a really hot day and said he was grateful for the AC,鈥� Incl谩n said. 鈥淭yrone and Senta have been great to work with. They have been transparent and great problem solvers.鈥�

鈥淚 am so thankful, very thankful, for Ana and her team for making this happen for me and doing so with ease. Thanks!,鈥� Bailey said.

Incl谩n noted that both companies have been in business for longer than five years, and Araiza and the Baileys have developed the business acumen to manage a Craft3 loan.

鈥淲e see a great opportunity in financing equipment and vehicles, which need longer terms than lines of credit offer,鈥� Incl谩n said, adding Craft3 also is interested in helping business owners convert their equipment to cleaner, lower-emissions equipment.

鈥淚t鈥檚 hard sometimes to get a bank鈥檚 attention for a relatively small loan or a project that seems too risky or too complex. Craft3 exists to make loans banks can鈥檛. So long as there is a reasonable plan to repay, we鈥檙e able to consider making a loan,鈥� Incl谩n said.

As part of its underwriting process, Craft3 focuses on the number of years a business has been operating and profitability in recent years. They use projections to determine a company鈥檚 ability to repay a loan, even if the company has no borrowing history. Transparency during the application process is crucial, and liens and collections are not necessarily a deal-breaker if the story makes sense and there is a clear repayment plan.

鈥淎s long as someone is upfront about their situation, we can work with them,鈥� she said.

Incl谩n noted that communities of color have historically been barred from land ownership and had their wealth limited by lower wages. Craft3 considers the racial wealth gap when it reviews an applicant鈥檚 personal wealth and income-to-debt ratio.

鈥淲e look at the whole story and make sure our focus is on cash flow and the ability to pay. We don鈥檛 want to make a loan that somebody can鈥檛 afford,鈥� she said.

Craft3 also recently hired a bilingual (Spanish) business services coordinator who is building a program to provide financial coaching and help prospective borrowers access services such as credit repair, bookkeeping and tax preparation.

If you are interested in learning more about financing with Craft3, please reach out to Ana Incl谩n at 971-263-8280 or [email protected].