Traditional commercial lenders obtain control of assets to assure that their loans will be repaid even if future cash flows of a borrower are insufficient to meet repayment obligations. Such lender safeguards are typically required to authorize a loan. This requirement can deny loan access for small business entrepreneurs who lack the physical assets or personal net worth needed to qualify.
The VJF, with a mission to invest in entrepreneurs bringing new businesses and jobs to higher poverty neighborhoods, brings greater flexibility to its investment review and decision process.
Repayment of VJF investments is important as we want to recycle our capital to support future investments. But we know that many of our borrower candidates will not be able to meet traditional lending requirements.
Our approach is to include venture capital due diligence techniques in our loan reviews, focusing on future business growth that will support repayment. With this approach, entrepreneurs who may not have personal wealth or physical assets to secure a loan can qualify for VJF funding if their business model and plan gives comfort that repayment can be made. This hybrid due diligence gives the VJF greater investment flexibility.
We will use this approach to support entrepreneurial small businesses that can grow and create new jobs and greater prosperity in challenged neighborhoods. The prosperity associated with our progress and success will be a key factor in restoring these neighborhoods and bringing dignity to their residents.