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Vice President Kamala Harris (C), Reign Free, owner of Red Door Catering, Sen. Alex Padilla (D-CA) and California Lt. Governor Eleni Kounalakis (D-CA) listen to Accion CEO Luz Urrutia Opportunity Fund (Front Left) and Allison Kelly, Executive Director of Inner City Advisors (Front Right) during a visit to Red Door Catering, a CDFI business, on April 5, 2021 in Oakland, California.

Patrick T. Fallon | AFP | Getty Images

Helping small businesses owned by people of color, immigrants and women recover from the Covid pandemic is the goal of a $40 million investment American Express made with Accion Opportunity Fund.

Loans, which began being issued this week, range from $5,000 to $100,000, depending on business needs. The average is expected to be around $28,000 according to forecasts from the nonprofit fund, which aims to help build a financially inclusive world.

“Our intent is to look at underfunded small businesses that are truly looking to get stronger, reopen, stabilize and grow in 2021 and beyond,” Accion Opportunity CEO Luz Urrutia told CNBC. fund. “[Businesses] we know they’re trying to invest, buy inventory, maybe pivot, and they need reasonable terms and credit to get back on their feet.”

To qualify for loans with a term of 12 to 60 months, the applicant must have been in business for 12 months, have proof of $50,000 in income per year and own at least 20% of the business. Applicants with low FICO credit scores will be considered, but their credit score will be a factor in determining the loan interest rate, which can range from 5.99% to 25.99%.

Owners of underfunded small businesses often use cash advances or other products from “alternative” lenders with a average interest rate of 94%, according to Accion research.

“We specialize, especially in companies that don’t have the traditional documentation that doesn’t fit well into the traditional credit boxes of much larger lenders like American Express,” said Urrutia, who has spent her career in the field of loans, in particular 18 years at Wachovia Bank before being acquired by Wells Fargo.

“For us, FICO is a data point, but if a client doesn’t have a FICO score. That’s okay. We’ll still lend if they meet other criteria. That requires specialty lending. A lot of mainstream traditional lenders really don’t have the capacity,” she said.

Black-owned businesses will be the focus of the Accion loan program.

Last fall, American Express announced a billion-dollar plan, which included a pledge to provide capital and financial education to 250,000 black small businesses and provide $25,000 grants to black women entrepreneurs in partnership with the non-profit organization IFundWomen.

“As we look at the outsized impact of the pandemic, combined with systemic racism, we know that Black-owned businesses have been historically disadvantaged,” Jessica Ling, chief executive of American Express, told CNBC. “It reignited American Express’ commitment to help support the black business community by providing access to funding, giving resources…to help them grow.”

Accion projects that the $40 million investment through the cash lending, repayment and lending cycles will grow into $125 million in loans over the next five years and enable small business owners to create or keep 10,000 jobs.

“Our philosophy is really about helping out, not giving alms,” Urrutia said. “The sustainability and value of our model is really about making loans to businesses that they repay, and we’re taking those funds and lending them to other businesses. It’s a virtuous cycle.”

Philanthropist Mackenzie Scott, ex-wife of Amazon founder Jeff Bezos, gave Accion a $15 million grant in August.