Usually, local governments handle things like law enforcement, providing social services and maintaining parks for the community; however, Guilford County government is now getting into a completely new business – banking – thanks to a proposal from the county’s Minority- and Women-Owned Business Enterprise Department (MWBE Department).

The move will enter the county into providing an entirely new service – loan guarantees for businesses that otherwise wouldn’t be able to borrow enough to buy the machinery or to hire the workers to take on a Guilford County project.

The idea is that one of the barriers for some MWBE companies getting contracts with Guilford County is that those often smaller, historically underutilized companies are unable to gain access to the capital needed to take on certain projects.

The commissioners discussed and endorsed the program in a Tuesday, June 11 work session and instructed county staff to work out the details and bring the contract back to them for approval.

The program will take $400,000 in taxpayer money and set it aside to back loans to businesses that otherwise would not be able to get loans.

The county is also planning on spending $150,000 to administer the program for three years.

MWBE Department Director Shaunne Thomas explained the program to the county commissioners at the June 11 work session. The program stems from the recommendations of a 2023 $300,000 Diversity Study the county conducted, which found that the county needed “to invest in more targeted outreach” for MWBE companies.

“It was very clear from the people that were surveyed, that the capital access was truly a barrier to competing in contracts,” Thomas told the board.

Other information from federal and state studies, she said, also show that “capital access is the number one barrier for our small minority owned business to doing business with municipalities.”

The loans will come from Community Development Financial Institutions – also known as CDFI’s – with those loans backed by Guilford County government.

“Eligible companies can request a loan guarantee against the $400,000 that we have in Guilford,” Thomas said. “After they are turned down by a bank, we are saying send them to us.”

“The good news is that the CDFI funds the loan,” Thomas told the board at the work session.  “They loan to the applicants, while we would actually guarantee the loan. We only actually lose that money as a county if one of the applicants did not pay the loan back.”

Thomas said this allows applicants to procure equipment or personnel – things that they would need to handle the contract.

“And everybody’s happy,” she said.

“Our goal is to get the firms to a point where they can apply for loans through regular banks, so helping them build a credit, helping them understand the benefits of repaying – and it makes them attractive at the end of the day to other firms,” she said.

The county commissioners liked the idea and consented to approve the plan in substance and directed staff to draw up drawn the contract.

Commissioner Carly Cooke said, “I’m really excited about it.”

Thomas said that, if a company is about to default, representatives of the CDFI would sit down with company leaders and “through education” make sure they understand  why it is in their best interest to pay back that loan.

If the company defaults, the county’s $400,000 fund would decline by that amount.

Here’s a description from the county of the initial plan, which staff is now tweaking “The Guilford County MWBE Department in partnership with Carolina Small Business Development Fund, selected through a Request for Proposal process, will offer a loan guarantee program to provide access loans ranging from $25,000 to $75,000. Prime contractors or subcontractors eligible for the Capital Access program must be certified as a North Carolina Historically Underutilized Business with a business in the Guilford County relevant market and have a new contract or subcontract with Guilford County. Guilford County contracts or subcontracts will serve as collateral for approved working capital loans. Working capital loans may be used for assistance with mobilization, equipment purchases, and the addition of workforce needed.”

One conclusion found in the county’s 2003 diversity study non-MWBE businesses, as compared to non-MWBEs: African American and Native Americans see more loan denials from banks and other lending institutions.

 The same study also found that acquiring commercial financing was a big barrier especially for African American firms.

Under the new program, MWBE Department would help with the ability create “a capital access program” for Guilford County certified and MWBEs, which otherwise might have to pass on a project because they can’t afford the cost of entry.

The county cannot loan money to a private company; however, this seems to be a legal way around that rule.  Durham County has done something similar and it appears to stand up to legal scrutiny.

Chairman of the Guilford County Board of Commissioners Skip Alston said, “We don’t have to reinvent the wheel if Durham County has already done it.”