Meda, the growing counselor and lender that works with minority-owned businesses, has brought in another $1 million in capital to support small-business growth.
And Meda CEO Gary Cunningham, about to move from downtown to bigger quarters in north Minneapolis, says he hopes to more than double Meda’s loan fund to $50 million within several years.
Opportunity Finance Network (OFN) awarded Meda -- Metropolitan Economic Development Association – and four other recipients $1 million apiece from its NEXT Fund for Innovation, “a pilot program that builds on ten years of innovation and impact driven by the Wells Fargo NEXT Awards for Opportunity Finance.”
The program funds business models and platforms that have demonstrated the ability to drive transformational change and scale in the community development financial institution (CDFI) industry. The NEXT Fund provides a new source of “patient, low-cost capital.”
Meda will provide a a low-cost, equity-like capital product to support early-stage minority-owned businesses in the Twin Cities that have potential for high growth.
“We’re proud to continue our work with OFN to help CDFIs continue to innovate in the communities they serve,” said Megan Teare, a senior vice president at Wells Fargo.
Cunningham said new sources of patient equity and debt, which have more flexible terms than traditional capital, are needed to meet demand among fledgling minority businesses.
“Meda is excited to be part of this innovative program to provide sorely needed patient capital to minority-owned businesses,” said Cunningham of Meda.
“Nationally, less than 10 percent of patient and equity capital is invested in minority-owned businesses,” Cunningham said. “Meda is proud to partner with OFN and Wells Fargo. By investing in these businesses, Meda will be helping them reach scale, increase revenues and become sustainable employers.”
Meda has grown its loan portfolio from $5 million to $18 million since Cunningham came aboard in 2014.
“We’re at about $18 million and on our way to $20 million … and we want to go to $50 million,” said Cunningham, a veteran nonprofit and government executive. “We’ve got $22 million in loans in the pipeline, already vetted, if we had the capital….The demand is increasing.’’
Cunningham said a $50 million loan fund would throw off enough revenue to Meda so that it would have to raise far less than the $1.7 million it must raise to cover some of its counseling and other services that it provides to small businesses that are not yet bankable by commercial institutions. Some of them support Meda. The idea is that the small businesses grow into larger, profitable concerns that will transition to relationships with traditional lenders.
Meda, which will move this spring into the new headquarters-and-office space under construction by Thor Companies at Plymouth and Penn avenues, has total revenue of about $5.4 million from its operations, including commercial-and-government contracts.
Meda’s loan-loss rate is about 1.1 percent, better than many commercial banks. It makes some loans through loan-participation arrangements with other banks, such as Wells Fargo and Venture Bank, which allows for risk-sharing and larger credits as its clients get traction.
According to a news release:Opportunity Finance Network (OFN), the national network of community development financial institutions (CDFIs), strives to ensure low-income and other under-resourced communities have access to affordable, responsible financial products and services. Members of OFN are CDFIs that help low-income communities join the economic mainstream. Through 2016, OFN’s network originated $54 billion in financing in rural, urban and Native American communities. This financing has helped to create or maintain more than 1.2 million start or expand more than 256,000 businesses and microenterprises and support the development or rehabilitation of nearly 2 million housing units and more than 10,000 community facility projects. For more information, visit www.ofn.org.