Since 2004, Build Wealth MN (BWM) has worked to reduce the racial wealth divide in the Twin Cities of Minneapolis-St. Paul, Minnesota, by helping individuals and families build wealth that can be passed from one generation to the next. “We saw how the economic potential of people of color was untapped in our community,” said David McGee, the executive director of BWM, which is a nonprofit community development financial institution (CDFI). “Lenders were taking advantage of communities of color to strip their equity, and our mission was to address these disparities by helping them build sustainable economic wealth.”

In the beginning, the organization held trainings at local churches to educate community members about predatory financial products and how to avoid them. “We wanted to help our communities understand and recognize the systems targeting them with predatory practices,” McGee said. “As a banker, I could bring what I had learned to help families avoid these practices and to gain access to capital.”

To date, BWM has helped more than 3,000 families become homeowners and learn to create and manage budgets effectively. Yet, despite its success and the small grants it received for training, BWM hit a funding wall when it decided to lend directly to its clients. “We were too tiny to get the funding necessary to lend at scale,” McGee said. This is not unique to BWM, McGee added. “It is common among nonprofits led by people of color who do the work in successful, outcomes-based programming. Finding funding to take our work to scale seems to consistently elude us.”

Enterprise capital, as I wrote in the report Blueprint for Enterprise Capital, helped shift the funding paradigm for BWM.

What Is Enterprise Capital?

Enterprise capital offers a way to build nonprofit's financial strength. It calls for multiyear, unrestricted funding that targets an organization’s balance sheet, matching the time frame and flexibility a nonprofit needs to support its long-term vision and strategy. At the heart of the case for enterprise capital lies the golden rule of finance that financial strength comes from the ability to match sources and uses of funds because long-term, flexible capital provides the patient funding necessary to build the infrastructure, capacity, and initiatives necessary to achieve an organization’s mission.

Read the full article about enterprise capital by Andrea Levere at The Bridgespan Group.