TCF Bank creates billion dollar ‘bold’ loan fund for minority women entrepreneurs
TCF Bank pledged on Thursday to lend $ 1 billion to small businesses owned by minorities and women over the next five years, a move that the president of the Detroit-based bank described as a “monumental” attempt and “Daring” to break down long-standing barriers to capital that entrepreneurs of color often face.
The bank is also putting $ 10 million into a grant program to help low-to-moderate-income homebuyers with up to $ 3,000 in help with down payments.
Both initiatives, which will be funded in part by the profits the bank derives from the paycheck protection program, are an intentional effort to tackle inequality and “the systematic racism that has denied so many pieces of the American Dream.” said Gary Torgow, executive chairman. of TCF Financial Corp.
“We’re really trying to do something that’s really monumental because we think it’s the right time to do it,” Torgow said in an interview with Crain’s.
Torgow announced the loan fund Thursday morning at a press conference in downtown Detroit with Mayor Mike Duggan; Warren Evans, Wayne County Director; Reverend Wendell Anthony, president of the NAACP Detroit branch; and Sherita Smith, executive director of Grandmont Rosedale Development Corp., which works with TCF Bank on development strategies as part of the city’s Strategic Neighborhood Fund plans.
For a Midwestern regional bank with about $ 50 billion in assets, setting aside $ 1 billion over five years for a specific group of borrowers is “a big commitment,” Torgow said.
In any normal year, the bank lends between $ 700 million and $ 800 million in business capital, of which about $ 100 million goes to minority-owned businesses, Torgow said.
“I told someone we were doing this and he said, ‘Did you say B for billion or M?’,” Torgow said. “I said, ‘B for a billion’.”
TCF Bank will make the loan fund available to businesses owned by racial minorities and women in its major markets in Detroit, Minneapolis, Chicago, Cleveland, Grand Rapids and Flint.
“A lot of this is going to focus on Detroit and Michigan,” Torgow said.
TCF Bank does not commit a specific percentage of the billion dollars of capital in Detroit or Michigan. Eligible businesses will be able to borrow up to $ 1 million from the loan fund.
“We estimated that at $ 1 billion we can answer a lot of calls,” Torgow said. “So we don’t really need to split it up.”
Black or African American-owned businesses are slightly more likely to have applied for bank financing than white-owned businesses, but less than 47% of black applicants are approved, compared to over 75% for white applicants , according to a 2017 Federal Reserve Report on the availability of credit for small businesses. The credit application data came from a 2014 annual survey of entrepreneurs conducted by the US Census Bureau.
Discrimination in funding and housing dates back several generations.
“This has been a problem long before I was in the banking industry… It is a problem that has evolved through the banking system,” Torgow said at the press conference.
By announcing this loan commitment, TCF Bank is acknowledging the past of the banking industry and what can be changed, he said.
Debt is not always a preferred response for small businesses, especially those that may not see the income needed to repay loans due to the pandemic or qualify for financing. Profit projections are not easy to make during the ups and downs of the COVID-19 epidemic, and spending has increased for safety equipment.
“We hope this is a very temporary situation, and with the programs that exist, we hope that they will continue to help those who are really in difficulty…” said Torgow.