Dwight Cooley’s path to opening a storefront for his catfish restaurant, Belzoni’s Catfish Cafe, hasn’t been easy. 

He started the business in 1994, working events around Fort Worth like Mayfest from the back of his truck. In August 2019, he opened a physical location at 110 Jim Wright Freeway. Funding has been a challenge. 

Along the way, he faced a major challenge: He said he couldn’t get a loan from a bank. Restaurants operate on thin margins. 

Cooley isn’t alone in his experience. Minority-owned businesses pay higher interest rates on loans and are more likely to be denied loans, according to a study from the U.S. Department of Commerce. Because of that, the city of Fort Worth wants to widen access to loans in communities of color.

Fort Worth officials funded a nonprofit to help provide access to loans using $3 million from the federal government’s 2021 American Rescue Plan Act. The law sought to boost the economy following the pandemic.

About a year after Community Development Financial Institution (CDFI) Friendly Fort Worth formed, the organization loaned $10.3 million to people seeking to finance a business, buy a house or use the funds for personal reasons. Community development financial institutions are organizations dedicated to serving low-income and underserved communities. 

Over the next five years, the organization wants to loan out $250 million. A recent report by the city shows most of the loans went to people buying houses and or seeking help to finance their businesses. City officials hope the organization will continue to play a role in affordable housing and small businesses. 

Running a business like Cooley’s is an expensive affair. If a piece of equipment breaks, for example, it could cost thousands of dollars. That’s why Cooley said the restaurant’s margins are tight. 

Cooley received a loan from one of the lenders, LiftFund, about a year and a half ago. The difference between a community development financial institution and a traditional bank? Flexibility. 

“(LiftFund) tried to make it work, even though you have some challenges,” Cooley said. “The banks want you to have huge (net incomes), and, you know, in the restaurant business, especially small restaurants like myself, our (net incomes) don’t necessarily reflect what these banks want.” 

Glenn S. Forbes, executive director of the Fort Worth organization, views his job as similar to matchmaking. As the newly appointed executive director of the nonprofit, he meets with people seeking funding for a business or home  and reaches out to financial institutions that might provide a loan. 

Breakout: What’s a CDFI? 

Community development financial institutions are organizations dedicated to serving low-income and underserved communities. The institutions are funded by the private sector and can take the form of banks, credit unions, microloan funds and venture capital providers, according to the Community Developmental Financial Institutions Fund. Because of $12 billion in CARES Act funding to support the nonprofit financial institutions across the country, the industry is well-positioned to increase the access to financial services across the U.S., according to analysis from the Federal Reserve Bank of Richmond. 

“We kind of act as a liaison between the business world so they’re not talking to 15 different CDFIs and getting 15 different answers, all of which may not be attractive for them,” Forbes said. 

Where have the loans gone? 

So far, most loan dollars have been for buying houses – $8.47 million of the $10.3 million, according to an April 4 city report. And 16% of the dollars went to small businesses.

While more than half of the dollars the nonprofit lended — 58% — were not in neighborhoods the city targeted for revitalization, Christina Brooks, the city’s chief equity officer, said there’s also great financial need outside those areas as well. 

The nonprofit acts like springboards for individuals who might not be ready for traditional lenders, Brooks said.

“They still need support, and so that’s where the CDFIs are stepping in, and filling in the gap,” Brooks said. “But we don’t want to take our eye off of the ball, which is those revitalization target areas.”

Forbes said his organization will partner with other organizations such as United Way of Tarrant County and various chambers of commerce in Fort Worth to spread the word about his organization’s services. 

Recently, Cooley received a loan for working capital to consolidate high interest micro loans he had. 

The help offered by his nonprofit financial institution isn’t perfect, because often the loans are not enough to fully fund his projects, he said.

“You have to come up with another source to get the rest of it,” Cooley said, “which again, is not advantageous.” 

Despite that, Cooley said, he is still waiting until he can apply for his next nonprofit loan to consolidate high interest from microloans like cash advance loans.  

The nonprofit financial institutions also aren’t leaders in interest rates — they historically range from 4-9%, Forbes said. Many of the lenders operate independently and some are funded through traditional markets and venture capital. In those cases, he said, some might be charging a higher rate. 

“If we’ve got to go to the markets for funding, that kind of pushes up our ability to keep rates as attractive as it needs to be for small businesses,” he said.

Loans could spur innovation, expand businesses in Fort Worth 

City officials like Brooks think the nonprofit could play a part with innovation in Fort Worth.

“It could be something as simple as taking an existing business, and then innovating it using technology,” Brooks said.

That could look like helping small businesses use technology to scale up, she said. Businesses need new software and hardware to ensure the company is keeping up with the latest technology in the industry, she said. 

There’s also room to help businesses expand, Forbes said. 

“Saying, hey, why not two? Why not three? You know, as you look at the business landscape to be competitive, and how competitive might you be with one …  how competitive could you be if you’ve got three across the city?” Forbes said. 

He said the funding will shift as market conditions in sectors like real estate ebb and flow. 

“When housing stock is slow, we need to be laser-focused on the small business arena,” Forbes said. “Because as we’re growing, small businesses are still … a major vehicle in the fabric of our community.”

Seth Bodine is a business and economic development reporter for the Fort Worth Report. Contact him at seth.bodine@fortworthreport.org and follow on Twitter at @sbodine120

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Seth Bodine is the business reporter for the Fort Worth Report. He previously covered agriculture and rural issues in Oklahoma for the public radio station, KOSU, as a Report for America corps member....