A new $70 million fund, launched by Wells Fargo, fintech Hello Alice and the Global Entrepreneurship Network, aims to provide small-business owners with capital and access to credit to scale their companies.
Wells Fargo is providing the initial capital for the fund, which will be deployed over the next five years. The fund is part of Hello Alice and GEN’s Equitable Access Program, which, through a partnership with Mastercard, provides small-business owners with access to credit and financial education.
The fund will provide credit enhancements, including guarantees, loan-loss reserves and cash collateral deposits to banks to enable them to increase their risk tolerance and help underserved and credit-challenged small-business owners access credit, the companies announced.
The fund follows the April launch of Hello Alice’s business health score tool, which, according to the company’s co-founder, Elizabeth Gore, allows small-business owners to take a “gamified approach” to improving their financial health.
“We know traditional credit scores are important, but we wanted to look at the whole of the business,” Gore said Wednesday during a panel discussion at the National Press Club in Washington. “What is your cash flow? What is your credit, what is your employee makeup? In about six minutes, we can tell you the financial health of your business in a 0-100 score.”
The tool also educates small-business owners on how they can improve that score, such as by separating one’s personal and business credit or applying for a small-business loan, Gore said.
Hello Alice worked with GEN, Wells Fargo and Mastercard to understand the data infrastructure needed to help small businesses access secured credit by leveraging their business health score tool, Gore said.
“Our macro objective is to unlock — with $70 million in grants — $1 billion dollars in credit,” Gore said. “There's a $40 billion gap in the [Black, Indigenous and people of color] community alone for those who apply and are declined business credit. Our goal is to really crack that open. And it's a great business opportunity.”
Lack of access to capital and credit is the No. 1 challenge for small businesses, Wells Fargo Foundation President Otis Rolley said on a separate panel Wednesday.
“And we know [small businesses] also need technical assistance and support,” he said. “That's why we're really excited about both the [business health score] tool and the fund: It’s that opportunity to provide these small businesses with the resources to be successful early on.”
The philanthropic venture also gives Wells Fargo the chance to take a flexible approach to solving the small-business credit issue, Rolley said.
“Something is clearly broken,” he said. “And it's going to take us rethinking how we think about credit and how we think about underwriting, and that's one of the exciting things about philanthropic dollars.
“I can take a little bit more risk, and the philanthropic side can explore, innovate and go different ways, because there are not the same regulatory rules that affect not just us, but all banks,” Rolley said.
