Business experts nationwide seem to agree that funding remains to be one of the biggest hurdles for emerging developers and small business owners, particularly minority and women-owned firms. Affordable financing can be difficult to access since banks will generally only finance 60 to 70% of the total project.
Even if the developers bring in their own equity of 10 to 20%, they fall short in fully financing their projects by 10 to 30%. Larger developers tend to have access to alternative financing either through private equity, high-net-worth individuals or federal programs like EB-5 but small/emerging developers may have to turn to more costly sources like mezzanine financing or rely on their network of friends and families.
The NYC Economic Development Corp, in partnership with Basis Management Group, LLC, hopes to tackle that problem with the launch of Emerging Developer Loan Fund (EDLF), which includes $10 million of capital committed by NYCEDC.
The Emerging Developer Loan Fund will help level the playing field for New York Citys burgeoning development firms by addressing what has historically been a real barrier to entry for these types of firms affordable financing, said NYCEDC President Maria Torres-Springer. Through City-led initiatives like these, particularly those that support minority and women-owned businesses, we are making sure that every City dollar spent is an investment in opportunity. NYCEDC is proud to work with Basis Management Group to provide critical financial support to budding developers.
According to NYCEDC, the Fund will help close the inequality gap and help further Mayor Blasios goal to support diverse communities and boost local economic growth by awarding $16 billion in contracts to M/W/DBEs over the next ten years.
To play the game, you need a stake the financial resources to transform a dream into a brick-and-mortar reality, said Brooklyn Borough President Eric L. Adams. Unfortunately, enterprises owned by minorities and women have often been prevented from accessing the lines of credit and other financing required to become a property developer, depriving communities in need of affordable housing and jobs. The Emerging Developer Loan Fund has the potential to dramatically expand opportunities and create a new generation of entrepreneurs who want to build in our neighborhoods, as well as to support my efforts to advance local companies that are investing in Brooklyns future.