| Name | Katie |
|---|---|
| Last Name | Hendrix |
| Home Address | 1100 Market Street Chattanooga, TN 37402 United States |
| Organization Name | Pathway Lending |
| Describe Your Role In The Organization | As the VP of Client and Stakeholder Development, I have the opportunity to be the community builder, market outreach, brand awareness and also lend to small business owners. We have a two person team in Chattanooga and I am one of the two who gets to serve in the Chattanooga community! |
| Organization Address | 201 Venture Circle Nashville, Tennessee 37228 United States |
| Website | https://www.pathwaylending.org/ |
| Best Phone Number To Reach You | 423-504-3450 |
| Alternate Phone Number | 615-732-7133 |
| Email Address | katie.hendrix@pathwaylending.org |
| Alternate Email Address | katie.hendrix@pathwaylending.org |
| Please Describe Your Project In Detail | Pathway Lending is requesting $2 million through the One Chattanooga Relief and Recovery Plan: • $1,500,000: Flex Fund Capital [Direct lending activities] • $150,000: Operating Support [Direct technical assistance, lending, underwriting and operations] • $350,000: Loan Loss Reserve [Supports long-term program sustainability] Pathway Lending, through its Flex Fund, will provide patient capital to accelerate the growth of black and women owned businesses in Chattanooga. The Flex Fund bridges the gap between debt and equity financing, providing a source of flexible and patient capital for growth-minded small businesses. Unlike traditional debt, the Flex Fund utilizes an annual payment structure to keep the capital in the business longer to support immediate and ongoing expansion activities. The Flex Fund represents an expansion of Pathway’s current activities in the Chattanooga market, where it has been lending to small, diverse businesses for more than a decade. The unique hybrid structure of the Flex Fund is a companion to Pathway’s other loan products offered through the Chattanooga Small Business Opportunity Fund, which focus on improving capital access for small and emerging enterprises, particularly minority, women, and veteran-owned businesses. This suite of capital access programming is further supported by Pathway’s extensive educational offerings, provided through online, classroom, and 1-on-1 formats. Pathway views education, particularly around financial management, to be a key differentiator of its services and one that keeps its clients on their path to success. These products benefit a broad community of entrepreneurs in Chattanooga, from emerging to established, and growth-minded businesses. They are delivered by Pathway’s local lenders and business advisors in consultation with the Chattanooga Advisory Committee, and further supported by Pathway’s internal team, technology infrastructure, and network of local community partners that has built inroads into diverse communities. The Flex Fund product, which launched in Q1 2021 in Memphis, has provided $665,000 in capital and 100 percent of clients have been black-owned businesses. Pathway Lending plans to replicate the success of this program in Chattanooga. The Flex Fund is intentional capital, where Pathway Lending works closely with an ecosystem partner to identify opportunities where a black or female-owned business can accelerate growth and build capacity. Pathway Lending uses a variety of structures to meet the needs of these businesses to accelerate revenue and job creation. The loan amounts range from $50,000 to $150,000. There are two types of loans: a line of credit, which is an ongoing loan and provides instant cash. The Innovation Model offers a more creative and flexible solution to your loan payments. • Line of Credit Model: 20% of project revenue, 20% of previous revenue, 5% fixed interest rate, up to 5-year term, interest only for 24 months and no personal guarantee. • Innovation Model: Percentage of gross margin and payback multiple determined by length of time balance is outstanding. Interest rate will be paid quarterly or added to the multiple to be received by Chattanooga Flex Fund if not paid current. The Flex Fund will be utilized to specifically to fill a gap in the access to capital continuum for black and female-owned businesses in Chattanooga that traditional financial institutions are unable to meet. The request for Loan Loss Reserves in addition to the lending capital and operational support is critical to the long-term sustainability of this program as it supports lending to a pool of businesses with increased risk profiles. Businesses accessing Flex Fund capital typically exhibit the following characteristics: • Proven ability and track-record of delivering a product or service • Senior management team with industry experience • Senior management team with financial management experience • Revenues of greater than $100,000 • Opportunity to scale business revenues by more than 2x in 24 months • Projected financial statements that support financial repayment o Example: debt service coverage of greater than 1.0x • Functional financial accounting systems (internal and/or external) |
| Please explain how your project meets the requirements of the American Rescue Plan | Pathway Lending’s Flex Fund supports small businesses directly impacted by the COVID-19 pandemic because it provides patient capital that stays in the business, allowing entrepreneurs more time to grow revenue during the recovery period due to the pandemic. This flexible financing will be extremely impactful to entrepreneurs for whom preexisting inequities have been compounded by the economic crisis brought on by the pandemic and who may need longer runways for recovery due to deterioration in their financial condition. Additionally, as part of this funding request, business owners will receive technical assistance to strengthen their financial and managerial capacity, focusing on financial practices, marketing, and operations. We believe in depth technical assistance delivered through online, classroom, and 1-on-1 formats, along with the Flex Fund’s patient capital can create a pathway to economic growth and a sustainable future for businesses severely impacted by the pandemic. |
| Where would your project take place? | Chattanooga, TN |
| How much will your project cost in total? | 2000000 |
| Do you have any matching funding sources from other local governments, private entities, non-profits, or philanthropic entities for your project? | Yes |
| Please describe the source and list amounts of any other funding. | Pathway will match this request with capital from our operations, including full-time staff support from in-market and headquarter personnel, infrastructure to deliver programming and underwrite loans, and educational programming, including 1-on-1 technical assistance, classroom training, and online education to support clients going through the Flex Fund program. This is a minimum of $150,000 over a 3-year period from other Pathway Lending programmatic funds to support education, lending, and general operations related to the Chattanooga Flex Fund Program. |
| What portion of the project are you asking the city to fund? | Of our $2,000,000 request to provide the Flex Fund program in Chattanooga, you can see the breakdown as follows. $2,000,000: $1,500,000: Flex Fund Capital $350,000: Loan Loss Reserve $150,000: Operating Support to deliver technical assistance, lending, underwriting and operations. We are asking the City to fund this new Flex Fund initiative. |
| If funded, when would your project start? | May 2, 2022 |
| How long would your project take to complete? | 3 years |
| What milestones would you use to measure your project’s progress? | In addition to the impact projections below, we will launch the program within 30 days of receipt of the award based on our existing staff and infrastructure. We will have an annual review of the Flex Fund performance with the Chattanooga Advisory Committee, and we will do mid-year surveys with all the loan participants. IMPACT: Year 1: Loans Dollar: $560,000.00 Number: 8 Average loan amount: $70,000.00 CDFT Target Market Qualified: 65% Year 1: Education Unique Attendees: 66 Resiliency cohorts: 4 Total Education and Coaching Hours: 130 % of Fund clients receiving education or TA: 80% Year 1: Clients Served % minority owned businesses: 55% % women owned businesses: 40% Year 2: Loans Dollar: $900,000.00 Number: 12 Average loan amount: $75,000.00 CDFT Target Market Qualified: 65% Year 2: Education Unique Attendees: 84 Resiliency cohorts: 4 Total Education and Coaching Hours: 170 % of Fund clients receiving education or TA: 80% Year 2: Clients Served % minority owned businesses: 55% % women owned businesses: 40% Year 3: Loans Dollar: $1,460,000.00 Number: 20 Average loan amount: $73,000.00 CDFT Target Market Qualified: 65% Year 3: Education Unique Attendees: 150 Resiliency cohorts: 8 Total Education and Coaching Hours: 300 % of Fund clients receiving education or TA: 80% Year 3: Clients Served % minority owned businesses: 55% % women owned businesses: 40% |
| How would you ensure accountability and transparency throughout the project lifecycle? | Pathway Lending’s work in Chattanooga is overseen by a 9-person community Advisory Committee. This committee has quarterly meetings, and its members include local foundations, entrepreneurial support organizations, and economic development consultants. This is where we actively report on our activity and work to ensure program transparency, accountability, and alignment with the needs of the community. As a Community Development Financial Institution, Pathway Lending is chartered to deliver financial products and services to traditionally economically underserved communities including minority, women, veteran, and rural businesses. A minimum of 60% of its lending must be delivered to low-income communities and Black or African American borrowers. Pathway lending seeks annual recertification as a Community Development Financial Institution with the US Department of Treasury, which makes consistent delivery of financial products and educational services to these communities the highest priority for the organization. |
| If successful, how would your project benefit the community? | Pathway’s Flex Fund is created specifically to fill a gap in the funding continuum for black and female owned businesses in Chattanooga. This program will benefit the community by addressing the capital access gap, not only in terms of providing financial capital, but also by using community engagement strategies and focused technical assistance to address social and human capital gaps to create relationships with lending institutions and service providers, like Pathway’s Business Advisory Services Team. We believe this access to capital will be extremely helpful to those black and female business owners, entrepreneurs for whom preexisting inequities have been compounded by the economic crisis brought on by the pandemic and who may need longer runways for recovery due to deterioration in their financial condition. Additionally, as part of this funding request, business owners will receive technical assistance to strengthen their financial and managerial capacity, focusing on financial practices, marketing, and operations. We believe in depth technical assistance delivered through online, classroom, and 1-on-1 formats, along with the Flex Fund’s patient capital can create a pathway to economic growth and a sustainable future for businesses severely impacted by the pandemic. Finally, this proposal, which includes direct lending capital and operating capital to support program delivery and technical assistance, also includes capital for loan loss reserves to help the program achieve self-sustainability by supporting fund deployment to diverse, traditionally underbanked communities with higher credit risk profiles. It allows Pathway’s Flex Fund to become a sustainable program that can deliver these benefits to diverse entrepreneurs for years to come. |
| How will you attract community buy-in for your project? | As a Community Development Financial Institution, Pathway Lending is chartered to deliver financial products and services to traditionally economically underserved communities including minority, women, veteran, and rural businesses. A minimum of 60% of its lending must be delivered to low-income communities and Black or African American borrowers. This has created a culture of community engagement, which Pathway Lending navigates through several concurrent channels: Community Partners (Eco-system Partners): As part of our continued relationship building efforts in Chattanooga, we work closely with other small business support agencies and economic development organizations like, the Urban League of Greater Chattanooga, CO.LAB, LAUNCH, and the Chattanooga Chamber. We work with these partners to engage with their various constituencies to share opportunities like the Flex Fund and related educational offerings. Community Advisory Board: Pathway’s Chattanooga Advisory Board has deep and varied relationships within the city, and are representative of local foundations, entrepreneurial support organizations, and economic development consultants. We will leverage these relationships to identify speaking engagements, community events and other ways to engage with business owners on this topic. Local Staff: Pathway has a staff of two full-time employees centrally located in the Edney Building downtown that have significant relationships with local entrepreneurs and ecosystem partners. These staff regularly host and participate in small business events to raise awareness and understanding of Pathway’s products and services. Existing clients: Pathway Lending has worked in Chattanooga for more than a decade. With the recent launch of the Chattanooga Small Business Opportunity Fund and the proposed Flex Fund this experience will continue to leverage our existing infrastructure to deploy capital to entrepreneurs and in communities often left out of the financial mainstream. |
| Name | Vickye Bone |
| Contact Information | vbone@ulchatt.net |
| Name | Liza Soydan |
| Contact Information | liza@catalyzingimpact.com |
| Name | Lynn Chestnut |
| Contact Information | LChesnutt@tsbdc.org |
| Is there anything else you would like us to know about your project? | Funds awarded to Pathway Lending to create this innovative and creative resource will continue to build upon a successful track-record and immediately have a positive impact to entrepreneurs and communities that have not had access to traditional financing. This will further implement our Value Statement of “A Determination to Help with Respect for ALL” and our Vision Statement of “No Missed Opportunities” describing our approach to serve the Chattanooga community in an impactful and sustainable manner. |