A new fund will lend operating capital to diverse businesses.

For many minority- or women-owned contractors, growth can be a chicken-and-egg problem.

They need to tackle bigger projects so they can expand. But completing those jobs often takes operating capital they don’t have and can’t secure from traditional lenders.

The good news is Kansas City has launched a new program for just this situation. The Diversified Contractors Growth Fund is designed to provide contractors with the flexible financing they need.

The fund is starting with $500,000. It’s a joint effort of AltCap and Port KC, which each contributed $250,000. The goal is to expand and strengthen the city’s pool of diverse contracting companies.

“This is what we do,” said Ruben Alonso III, the president of AltCap, which will administer the fund. “We try to deliver nontraditional, alternative financing for gaps in the capital market.”

The fund has already approved its first loan. A local heating and cooling company is borrowing $35,000 for a project at St. Michael’s Veterans Center.

To work with the Diversified Contractors Growth Fund, borrowers must be certified as women-owned or minority-owned contractors. They must either be based in Kansas City, Mo., or be working on jobs inside the city limits.

Currently, only commercial construction projects are eligible. The typical loan will be for $50,000 and can be used for materials, equipment, payroll and other expenses. The loans will be secured primarily by the construction contract, but different types of collateral will also be considered.

The maximum term for the fund’s loans would be 12 months, Alonso said most would be paid off quickly.

“The good thing is these are supposed to be short-term loans,” he said. “We want to see this fund revolve as much as possible.”

Ideally, the fund will grow to $1 million or $2 million in size within a couple of years, Alonso said. While the fund’s initial $500,000 is a good start, there is still huge demand from minority and women contractors who need operating capital.

“It’s not going to be close to meeting the demand,” Alonso said.

Next up for AltCap? In the next few months, the organization plans to launch a loan fund for small contractors working on home rehab projects in the urban core. The initiative is a partnership involving Legal Aid, the City of Kansas City, Mo., and the Land Bank.

That’s in addition to other funds already offered by the organization, which is officially recognized as a Community Development Financial Institution (CDFI). AltCap administers a microloan program for local artists, awards New Markets Tax Credits to spur development in the urban core and approves loans for façade improvements.

“As a CDFI, we are able to target our lending where it is needed the most, giving us the flexibility that a bank or a traditional lending institution doesn’t necessarily have,” Alonso said.

Learn More

Interested in the Diversified Contractors Growth Fund? Contact Carmen Lopez at (816) 216-1851 ext. 2 or carmen@alt-cap.org.