SWAP (Stop Wasting Abandoned Property)
439 Pine Street
Providence, RI02907

Ms. Carla DeStefano
Executive Director
401-272-0526

Strategy: Innovative Models and Proven Programs
Region Served: Providence

PROJECT TITLE: Neighborhood Contractor Working Capital Loan Program

WHY THIS GRANT:
In 1998, with the assistance of the Foundation, SWAP (Stop Wasting Abandoned Property) established the Neighborhood Contractor Mentoring Program to help skilled construction craftspeople in the community develop the skills necessary to build their businesses: blueprint and specification reading, cost estimating, scheduling, and cost accounting. To date, 33 neighborhood and minority contractors have graduated from the program. SWAP now offers the program every year.

Before the first class was even over, participants told SWAP that the skills were great, but what they really needed to go to the next step – beyond the “one guy with a toolbox and a pickup truck” stage -- was money, working capital. To successfully bid on anything larger than small household repair and renovation projects, new contractors need working capital and credit to pay workers and to purchase supplies and materials. Without substantial personal assets to borrow against, aspiring new contractors cannot take that critical next step. Banks have not been willing to do micro-lending in the construction industry; the technical assistance required for each applicant simply cannot be supported with the revenue generated by the resulting loan.

To address this gap, SWAP will work with Citizens Bank to establish the Neighborhood Contractor Working Capital Loan Pool. SWAP will borrow $500,000 from Citizens under a revolving credit agreement. SWAP will administer the loan pool and will make loans of $5,000 to $50,000 to entry-level contractors. The terms of each loan will be customized according to the scope of work and schedule for the completion of each project. Underwriting requirements for the loan pool will mirror that of banks’ commercial loans so contractors will be able to build their credit-worthiness. Loans will only be available to those contractors with no access to bank financing. Initially, the pool will only be open to those who have completed SWAP’s mentoring program. There will be a time limit of two years of participation in the loan pool, after which contractors should become valuable customers of local banks.

As an added benefit to the program, SWAP has many active construction projects underway in Providence and elsewhere in the state. Entry-level contractors with new financial capacity will be key parts of the workforce building new affordable housing, as well as new entrepreneurs building the vibrancy of their community.

This Foundation grant will support a consultant to serve as project director. The consultant may be a retired banker or someone with experience in finance and an interest in aspiring business people.

SWAP and the Foundation will evaluate the project’s success through a review of how the revolving loan fund “revolves” – how many contractors pay back their loans and borrow again for their next project – and, over a number of years, how many participating contractors go on to develop their own independent business credit.

PRIOR FUNDING OVER PAST 3 YEARS:

2002
$500 Neighborhood Reinvestment Training Institute

2001
$25,000 staff support for the Neighborhood Contractor Mentoring Program.

2000
$500 Neighborhood Revitalization Seminar