As we begin 2024, we at the Momentus Capital branded family of organizations want to thank all of you – whether you are a borrower, a partner, an investor, or a member of the Momentus community – for being part of our work to reimagine and build an economic system that includes everyone.
Read what our President and CEO, Ellis Carr, has to say about the impact you helped us create in 2023 and about the outlook for the year to come on the Momentus Capital blog.
Across the Momentus Capital branded family of organizations, our mission is to ensure people and communities have the capital and opportunities they deserve to overcome a history of systemic disinvestment.
To support underestimated communities in achieving positive social and economic outcomes, we need a shared understanding of what that looks like, and why those outcomes are so important. This blog will outline how we at Momentus Capital define economic stability and why it is important, how it is tied to the other social determinants of health, and how we are working to promote economic stability through our work.
Read the full article on Momentus Capital’s blog.
By Alexander McDonald, Senior Director of Lending Operations
For communities to thrive, they need resources — but too often, small business owners, developers, and local community development leaders lack access to the capital they need to drive progress.
Across the Momentus Capital branded family of organizations we are on a mission to change that through a community-first approach to lending grounded in our commitment to diversity, equity, and inclusion. And for us, that includes much more than the actual continuum of capital we deliver, but also HOW engage with our borrowers and partners to do that. Every aspect of our lending operations is built on our values, which means taking out a loan from Momentus is a much different experience than borrowing from a traditional financial institution.
But our approach doesn’t just feel good. It also leads to exceptional outcomes. The secret to our success? Putting the borrower first with superior client service, competitive products, and scaffolded support.
And our lending operations team is at the heart of what makes Momentus unique.
To learn more about how our lending operations team works with borrowers and supports social impact, please read our full blog on the Momentus Capital website.
By Masouda Omar, Head of Small Business & Community Development Credit – Lending Operation
As a Community Development Financial Institution (CDFI), Capital Impact Partners has played a part in both upholding and dismantling systemic bias in the credit system.
Since our inception, we have served sectors, industries, and borrowers not served by the traditional financial system.
Like many CDFIs, Capital Impact provides more flexibility than traditional lenders in some key areas like loan-to-value limits and financial covenants that borrowers must meet.
However, our credit guidelines – the policies that guide our loan structures and lending decisions – are built on the traditional approach to credit that has deep roots in a financial system that intentionally excluded some people for much of its history. Often, our lending team seeks one or several “exceptions” to our credit guidelines to accommodate the diverse needs of our borrowers.
Creating flexible financing is both a mindset and an approach. To do so, we need input from our clients and communities to rethink and reshape our products and requirements. When done correctly, this approach gears us away from the extractive patterns of traditional financing and closer to confirming that when people are given the opportunity to succeed, their communities, local residents, and our country thrive.
We have spent the last several years providing capacity building and support to community-rooted developers across the country. Having seen in our own lending that these developers were not well represented and hearing the barriers that they face in scaling up to work on more and larger projects, we determined that we needed to take bigger steps to address the need.
In that light, we spent the better part of 2022 reviewing and revising our lending requirements and processes to be more equitable, to better support community-rooted developers and borrowers from all walks of life in having access to the capital and opportunities they deserve.
As a part of the Momentus Capital branded family of companies, it also became important for Capital Impact to revise and improve efficiencies in lending approval processes to account for a combined strategy.
Because one of the most important parts of transformation is transparency, we want to share the recent updates to our credit guidelines with our communities, partners, and other stakeholders.
Staying true to our vision, we want to be able to support community-centric developers who might not have had the opportunity to build and sustain a track record in the markets where they are active.
We are committed to looking at the borrower as a whole, taking into account their background including education, work history, participation in the EDI program or other capacity building initiatives, as well as any relevant experience with joint venture partners and consultants.
We wanted to lighten the load on a borrower to bring a certain amount of cash to each project.
This change benefits borrowers by allowing them to preserve their funds and use them toward working capital, growing/expanding their business, hiring staff, etc.
Given that most of the borrowers we work with have limited resources, we have eliminated the requirement of a strong guarantor possessing liquid assets and cash flows.
We still expect people who own 20+ percent of a business and are actively engaged in the business to issue guarantees, but we now look at guarantees as an assurance of the borrower’s commitment to the project rather than as a source of repayment.
We are mindful that not every developer has the expertise and capacity to pursue larger-scope projects with more than 20 units. This, however, should not impede them from having the opportunity to start smaller projects that may be a better fit for their current experience level.
Smaller unit projects often have higher credit risk because a single vacant unit could jeopardize the project’s ability to make loan payments. However, smaller projects are an important stepping stone for many developers trying to build their portfolios, and we can mitigate the risk with other things like operating reserves and technical assistance.
That being said, we do have minimum loan sizes (now $500,000), but this does not have to impede borrowers from coming to us, as we are actively building a partner network to which we can refer clients in need for smaller loan sizes.
As a mission-driven organization, it became all the more important for us to improve efficiencies in lending approval processes so as to be able to serve entrepreneurs and their communities seamlessly.
To that end, we have worked on the follow updates:
The changes above are only a starting point. We are committed to adapting to the needs of our borrowers by adding new products and continuing to evolve our credit guidelines in a way that meets the needs of our borrowers. In addition, we are building out a more robust network of technical assistance for our borrowers that ultimately reduces credit risk to both the borrower and the lender. One great example of that is our EDI program. Through EDI, we aim to provide capacity building in the form of training, mentorship, access to technical assistance, and predevelopment grants (where/when available) to community-centric developers, so as to enable them to succeed in projects appropriate to their levels of expertise.
We are continuing to think through how we can fold equity into our credit guidelines to transform how capital and investments flow into communities. We are excited to share more about our journey as we grow and evolve to serve communities.
Contact us today to start a conversation about how Momentus Capital can support your journey to success.
This blog originally appeared on the HAND blog. You can read the original post here.
Affordable housing development firms working in disinvested communities — both nonprofit and for-profit — are highly constrained in the housing industry, yet are a critical resource for strengthening the housing development ecosystem as a whole and expanding the supply of homes that are affordable.
To support the growth of and opportunities for community-centric developers in the Washington metro area, as well as increasing the amount of affordable housing regionally, Capital Impact Partners partnered with Amazon to create our HEAF program. The fellowship provides training, mentorship, and grant capital to support wealth building for developers and their firms, and community building through increased affordable housing.
One of our HEAF participants is Ronette “Ronnie” Slamin, founder of Embolden Real Estate. In this blog profile by HAND, she discusses her journey to becoming a real estate developer, how she views real estate development as a tool to address infrastructure issues, and being intentional about creating space for women in real estate.
The HAND network is hard at work to address the growing housing affordability challenge across the Capital Region. Five Minutes With is a series highlighting these members and other stakeholders. This informal conversation delves into their recent projects, the affordable housing industry, and more. In this edition, we had a conversation with Ronette “Ronnie” Slamin, founder of Embolden Real Estate. Check out our dialogue below to learn about her development firm, what she believes women leaders in the real estate industry can do to move the needle in a different direction, and the importance of explaining the multiple levels of housing affordability.
Ronnie Slamin (RS): Embolden Real Estate is the company that I founded in 2021, a development firm with consulting services related to project management, entitlements, and community engagement. The name of my company came to me when I was reading a book on education, as I’ve always wanted to work at the intersection of housing and education to improve educational outcomes.
I landed in the industry of real estate by way of an undergrad professor Joseph E. Corcoran at Boston College, who was a successful developer and a pioneer of mixed-income housing. I had returned from a summer service trip to Jamaica and was interested in ways to improve the infrastructure in the remote town I volunteered in. Coincidentally, I took his class and realized that real estate development was a great tool to address infrastructure issues such as roads, homes and schools.
RS: I am excited about how every day in real estate development is different and how many hats you must wear, from project management, financing, design, construction, property management and sometimes even a social worker. As a person who gets bored easily, I love that it’s always changing and keeps you on your toes. I also love that you can see the result of your hard work just by walking past projects you have completed.
Knowing that you’re providing families a home, a place to create memories, a place to feel safe, and a place to grow is very rewarding and motivating.
Ronette “Ronnie” Slamin, founder of Embolden Real Estate
RS: The history of racism in the housing industry is a painful reality with deep-rooted impacts that continue to be felt today. I think as an industry, we can move the needle in the right direction by being intentional about creating diverse work cultures and pushing for affordable housing to be in high opportunities neighborhoods.
As a woman, I believe we need to be intentional about creating a welcoming space for other women, and by doing so, we will create a welcoming space for all. Research shows that women usually take on more family and household responsibilities. As an industry, we can make an effort to support women by scheduling events at different times (not always in the evening), offering better benefits, and flex work from home. To support them in the industry, I think it first starts by increasing exposure to the field. The real estate field is an unknown industry to many, so I think we will start seeing more diversity by creating that exposure and awareness of the opportunities.
RS: I don’t think there’s a secret sauce, but I would say I think it requires creativity and collaboration. Housing affordability is a huge issue that will not be fixed overnight and requires different tools based on the deal. I think if we can work together we will be able to have a huge impact. I would consider the largest obstacle to be marketing and optics. I think the word affordable housing has just become such a loaded term, and with many definitions, we often do not realize that we may not be talking about the same thing. When you mention the word affordable housing, you can sometimes raise red flags where, even if many in the community would qualify for that affordable housing. So, I think marketing needs to explain the affordability levels, the quality, and the great positive outcomes that can come from affordable housing.
RS: I stay motivated to work in affordable housing because of its impact on residents and communities. Knowing that you’re providing families a home, a place to create memories, a place to feel safe, and a place to grow is very rewarding and motivating.
RS: I would probably be in the sports industry if I were not in real estate. I was working towards being a sports broadcaster or agent before taking that real estate development class in college.
As a real estate developer looking to deliver social impact, the process of finding and engaging with a lender can be hard. Once your mind is set on starting a community development real estate project, who do you turn to? Where do you find them? What is the process like?
As part of the Momentus Capital family of mission-driven lenders, Capital Impact Partners – a certified Community Development Financial Institution (CDFI) – provides flexible and affordable loans of $650,000+ ($350,000 under special circumstances) to finance key community pillars, including health centers, education facilities, food retailers, affordable housing, small businesses, and cooperatives.
We are a national lender, capable of providing loans across the country, but we also have a place-based focus in specific regions, including California, Michigan and northwest Ohio, the New York Tri-State Area, the Southeast, Texas, and the Washington metropolitan area.
We know you have got questions about the community development real estate process. To help get your process started, we offer some answers here about working with a CDFI lender.
It is never too early to start gathering information from lenders, but you’d ideally want to get started when you are about six months from starting construction.
By then, you would have a good estimate for the timing of obtaining permits and starting construction.
CDFIs such as Capital Impact Partners will work hand in hand with real estate developers looking to deliver social impact
Lenders will have contingencies on your project that may go above and beyond what you have budgeted; usually 7.5-15% of hard costs expenses and 5% of soft cost expenses.
If you are capitalizing interest during construction, which is recommended when there are no operations ongoing during construction, that will need to be included in the overall project budget.
Once construction is completed, there may be lease up reserves, debt service reserves, and/or facility maintenance reserves.
CDFIs serve as capital aggregators that attract capital from the market, banks, government sources, and foundations.
CDFIs do both. At Capital Impact, if they are sold, we ensure that there is no impact on the Borrower’s experience or relationship.
Primarily it is the Treasury rates, unless the CDFI has a sector/geographic fund that is independent of Treasuries.
CDFIs have groups that review deals. Capital Impact has an internal credit committee that reviews deals on a weekly basis.
Some CDFIs or specific loan products require external review and approval. Underwriting packages must be submitted at least a week in advance to receive approval the following week.
The committee cares about the financial strength of the transaction, the deal fitting into our established credit guidelines, and the impact of the transaction on the community.
Capital Impact typically provides 1-10 year loans for $1-10 million that fund construction of facilities. The loan is typically interest only during construction and can amortize longer than the maturity, resulting in a balloon payment at maturity.
You may first interact with a business development officer or someone with a similar position, who will be the initial point of contact until a term sheet is signed.
Then you’ll speak with a loan officer who will underwrite your transaction until it is approved.
Once approved, a legal and closing team will drive the process, but the loan officer will remain involved to ensure the loan is closed according to what was agreed to with the borrower and as outlined in their underwriting.
Consider seeking legal counsel to review a loan document. But generally, check that the interest rate, fees, and dates match your understanding. Check the reporting and financial covenants to ensure you can meet them.
Tell your lender as quickly as possible. CDFIs are lenders with a mission to provide fair, responsible financing, and they will work closely with you when things are tough. Another very important element to take into consideration when looking to establish a relationship with a community development real estate lender is that lender’s value system. You have the right and responsibility to vet the lender to make sure that their values, goals, and philosophies align with yours. It is a two way street and any conversation about funding should be as much about the entrepreneur evaluating the funder as the funder evaluating the entrepreneur.
Momentus Capital’s Chief of External Affairs, Robert Villarreal, recently testified in front of the Senate Committee on Small Business and Entrepreneurship about improving access to capital in disinvested communities through the Small Business Administration (SBA) Community Advantage (CA) loan program.
The Community Advantage pilot program was launched in 2011 to expand the points of access that small business owners had for getting loans from mission-driven financial institutions. These lenders intentionally support underestimated community members, businesses, and organizations – with an emphasis on assisting people of color, women-owned businesses, and startups.
Read the rest of the blog and watch the testimony on the CDC Small Business Finance website.
By Ellis Carr, President and CEO
2022 is a special year for us at Capital Impact Partners as it marks our 40th anniversary. Four decades of leaning into helping people build communities of opportunity and developing pathways to success.
And while this is an exciting time for us as we embark on a new strategy under Momentus Capital, it is equally important to remember our roots as a champion for the cooperative movement.
By Ellis Carr, President and CEO of Capital Impact Partners and CDC Small Business Finance (each is part of the Momentus Capital branded family of organizations)
In 2022, a Fast Company piece by Porter Braswell released new statistics that painted a telling picture: in 2021, only 1.4% of Black founders received venture capital funds. That’s a stark number when you consider that more than 13 percent of the U.S. population is Black or African American. It is not surprising, however, given that Black investors only make up 3% of the venture capital industry. The numbers are similarly poor for women-led startups, which only receive 2.3% of venture capital funding, and whose leaders only make up 5.7% of venture capital partners.
When you think that racial inequality, specifically as it relates to Black Americans, has cost our economy over $16 trillion over the last 20 years, it’s clear that our approach to investing in diverse entrepreneurs needs to change.
Companies serving historically disinvested communities, especially those led by entrepreneurs of color, often face barriers to securing the investments that they need to grow. This may include business knowledge that is limited as a result of not having a formal education or not being able to pursue an advanced degree. Limited networks and lack of access to family wealth can create obstacles to securing basic startup costs or working capital. Seeking traditional financing has been an ongoing barrier to success for generations due to systemic biases.
While local leaders are best positioned to drive community-driven solutions, they still consistently butt up against systemic barriers to accessing capital. It is often confusing for business owners to know where to start or who they can turn to. This situation often forces entrepreneurs to rely on extractive capital or on the onerous requirements of debt like putting up collateral or personal guarantees that are often predicated on and exacerbate an inequitable system. Generations of inequality have made it harder for entrepreneurs of color and women to accumulate wealth that could be leveraged for investment. Having less existing wealth means one receives less favorable terms of financing, putting at risk the disproportionately smaller amount of wealth one does have.
The Momentus Capital branded family of organizations aims to interrupt this vicious cycle. We envision an economic system that respects and uplifts all peoples’ right to achieve the dreams they have for themselves, their communities, and generations to come by changing the way community-centric businesses secure capital.
Led by a diverse team of experts, Momentus Capital’s approach is fundamentally different. Starting with a listen-first approach, our focus is on social impact and on growing companies in a culturally respectful manner.
We are uniquely positioned to grow mission-aligned companies by acting as a single source with the ability to provide them with a continuum of financial, knowledge, and social capital.
To us, this takes many forms:
In addition to this holistic approach, where we truly differentiate ourselves from traditional venture capitalism is through our philosophy on equity. It is our intention that any impact investment we make is designed to be regenerative or non-dilutive. Our end goal is focused on helping companies grow while also ensuring that the entrepreneurs, employees, and community members retain the equity.
Our impact investments team also takes a unique approach that begins by getting to know the company from the inside. This helps us understand what impact the company wants to have on its community; what unique solutions it is seeking to deliver that support equitable outcomes for health and wealth building; and what challenges the company has faced in raising capital as a result of being led by an entrepreneur of color or of serving a disinvested community.
Armed with that knowledge we can develop a flexible and patient approach that is first and foremost designed to help businesses achieve their growth visions sustainably.
We do this by offering these primary investment vehicles:
We put these tools to work by engaging with diverse entrepreneurs focused on building healthy, inclusive, and equitable communities. This includes companies that:
We’re further helping to fuel economic growth and opportunity by fostering deep connections in our communities. Currently, the Momentus Capital impact investments program target geographies include Atlanta, Ga.; California; Detroit, Michigan; the Washington, D.C. metropolitan region; Miami, Florida; New York Tri-State area; and the Texas Triangle (Austin, Dallas, and Houston).
We’ve already demonstrated the positive impact that our approach is creating with and for community-minded companies.
Take, for example, Abner Mason the president and CEO of SameSky Health. Mason launched SameSky in 2013 to advance health equity for Americans who are marginalized or under-resourced by helping them better navigate the complex health care system.
To grow his company, Mason needed investors but has long been frustrated by those who either would not invest in him as a Black CEO, or were not supportive of his solutions that focused on disinvested communities.
Where others saw risk, we saw an opportunity. Through our impact investing program, we provided SameSky Health with a $5 million venture debt bridge loan to support the growth of the company as they progress to raise Series C funding.
You can read more about our partnership with SameSky in this Q&A with Mason.
We also worked with Obran Health, a unique company that operates worker-owned health care companies designed to give decision-making processes and capital back to caregivers, operators, and health care workers. A lot of Orban’s affiliates are managed by worker-owners who are women of color, and so this was an excellent opportunity to make an investment that supported wealth building in a way that would stay with the employees in their communities.
You can read more about our partnership with Obran Cooperative in this story.
When Obran Health sought to acquire Physicians Choice Home Health, a home health care provider in Los Angeles, we provided a $1 million preferred equity investment. This allowed Obran to avoid the traditional route of syndicated loans and debt which would have hampered their long-term growth.
