Pittsburgh ranks dead last among 50 metro areas nationwide when it comes to the percentage of businesses owned by a Black entrepreneur, according to a February 2022 analysis from online borrowing platform LendingTree. And a key reason, observers say, is that minority-and women-owned businesses lack access to capital. Pittsburgh’s Urban Redevelopment Authority has announced two new pilot programs, and a total of roughly $5 million, intended to help address that inequity.
“It takes money to grow your business,” said Thomas Link, the agency’s chief strategy officer. But URA officials saw a gap in the city’s business ecosystem: There’s a lack of what Link called “risk capital,” — money that allows businesspeople to take on positive risks, such as hiring someone or buying more products to expand sales.
“Businesses are risky ventures and they may not work,” Link said. The URA programs, he said, "are meant to sit side-by-side with entrepreneurs and take risks with them.”
The board of the URA will vote on two programs to benefit minority- and women-owned firms, known as "MWBE" companies, on Thursday.
The first is called URA Ventures, and has three distinct investment paths, the first of which is “Mainstreet Ventures.” Small businesses can apply for loans up to $100,000 at an interest rate of 3%, which the URA will allow to be paid back as the business generates revenue. The second path is called the “Pittsburgh Entrepreneur Fund 2.0.” MWBE firms in the fields of innovation and technology — “that’s a broad classification,” Link said, and purposefully so — can apply for loans up to $125,000 at an interest rate of 8%. Again, the URA could see its return through the business’s profits, or when the business is sold or attracts new investment. The third path is called “Venture Co-Investment,” also for technology and innovation businesses. The URA would become a limited partner in existing investment funds that are either MWBE-run or have goals that align with those of the agency.
During the pilot, the URA wants to invest up to $750,000 in that last investment path. Link said the URA’s money would have to go to Pittsburgh-based businesses.
The second URA initiative will be called the MWBE Developer Equity Fund. The URA would invite minority or female developers to apply for up to $500,000 to finance a development project. Link said there’s an old quip in real estate: “How do you make a little bit of money in real estate? You have to have a lot of money.”
He added, “Some developers have great projects … that meet both mission and reasonable expectation of economic return,” but they don’t have the funds to get a loan or attract other investors to ultimately make the deal work. Ideally, the money put up by the URA will help MWBE developers create neighborhood-identified benefits, such as the rehabilitation of an important community structure, creation of affordable housing or jobs. In particular, the URA will be looking for developers and projects along Avenues of Hope, commercial corridors in seven of Pittsburgh’s historically Black neighborhoods.
It’s important for the city and the URA to support people and projects that “make the neighborhoods that we serve invigorated and have more of the things that they want and need,” Link said.
Also on Thursday members of the URA board are expected to vote to create a new fund that could leverage New Market Tax Credits to help underwrite further Avenues of Hope investments.
