When the coronavirus pandemic reached Louisville, its low-income residents and very small businesses were among the hardest hit.
They endured business closures, job losses and the elimination of child care and schooling for their kids.
These are the clients of The Louisville Housing Opportunities and Micro-Enterprise Community Development Loan Fund, Inc. (LHOME), a nonprofit low-interest lender with Jewish roots (more on that later) that assists people and businesses in need.
We have had to pivot to serve these people during the crisis. Their expenses, rent, utilities, food and medical care continue, though without the corresponding revenue.
So, LHOME, the city’s only nonprofit certified community development financial institution (CDFI), has created two COVID-19 pandemic emergency loan products. It also shifted its business model from in-person lending and financial coaching to completely virtual lending and financial coaching.
On April 6, LHOME launched its new loan products: The Lifeline Loan, which pays bills for community members up to $500 for emergencies (utilities, water, rent, prescription medicine) and the Small Business Continuity Loan.
The Lifeline Loan is a vital alternative to predatory lenders that set up shop in neighborhoods underserved by traditional banks, making so-called “payday loans.” Those lenders charge about 400 percent interest, so someone who borrows $500 for emergencies can end up paying up to $2,000 in interest and fees when all is said and done.
By contrast, LHOME’s loan charges 15 percent over 12 months so that a $500 loan ends up costing a total of approximately $542.
The Small Business Continuity Loan provides up to $25,000 to very small businesses (fewer than 10 full-time employees) within a few days, paying for wages, rent and equipment. It also provides working capital. In just the first week of launch, LHOME approved 16 small business loans worth $346,110 to help entrepreneurs not only survive but hopefully thrive long past this current crisis.
LHOME approved 11 Lifeline (anti-payday) loans totaling $5,300 with about $32,000 in the pipeline. We have paid bills for vulnerable community members for prescription drugs, rent, gas, electric, and water. LHOME also is providing online financial coaching via Zoom and FaceTime.
You may have heard about Federal assistance for small business owners and the $1,000 available to low-income families. LHOME knew that these programs would take a while to launch. Several people would not have the tools to apply and it would take time to receive the financial assistance. We developed these products to serve as bridges for the other funding.
Additionally, LHOME is providing financial coaching and reports timely repayments to the credit bureaus. So, instead of creating a debt trap, LHOME’s small loans help Louisvillians pay their bills, have some breathing room, create a viable repayment plan and raise their credit scores so consumers can pay less interest on future debt.
LHOME is actively raising funds for both of these loan funds: For the Small Business Continuity Loan Fund, Louisville Metro has provided $500,000; LHOME has committed $500,000; Render Capital, $150,000, with other funds provided by Endeavor Board Chairman Brook Smith and others. This loan fund is offered in partnership with GLI, Louisville Forward, Render Capital and Lenderfit. The partnership also has challenge other individuals and banks to invest.
LHOME was co-founded in 2012 by Judy Tiell, retired executive director of Jewish Family & Career Services (JFCS) and Cathy Hinko, executive director of the Metropolitan Housing Coalition (MHC) – two visionaries who knew that Louisville was under-invested in CDFIs – lending institutions serving communities that typically lack access to affordable, accessible loan products.
The St. Louis Federal Reserve Bank shows CDFI Investment in Louisville to be far below comparable cities, including Cincinnati, Nashville, Indianapolis, Memphis and Columbus.
Over the past three years, LHOME has expand its offerings and heighten its impact. To date, we have made more than 110 loans, with over $2 million lent primarily to low-income minority small business owners and families needing to make critical home repairs, elderly homeowners on fixed incomes to pay property taxes and small investors of color in West Louisville needing capital to flip or rent affordable housing.
The work LHOME is doing during this crisis is consistent with tis Jewish roots. This is tikkun olam (repair the world) in action.
I am thankful for this opportunity to reflect on how my organization is benefiting our greater community, especially during the coronavirus pandemic.
(Amy Shir is president and CEO of LHOME.)
Want to help?
For more information about LHOME or to invest, visit www.lhomeky.org.