TD Bank is launching a $100 million equity fund to support lending to minority small businesses.
TD plans to invest $75 million in specialized small-business investment companies that is intended to assist minority- and women-owned small businesses, as well as those that operate in underserved communities.
TD has earmarked another $25 million specifically for Black- and Hispanic-owned businesses to be funded through community development financial institutions, which it says are “notably skilled” at serving businesses in communities of color.
“We want to get the money out as fast as we can,” said Michael Innis-Thompson, TD’s head of community lending and development. Indeed, the bank hopes to have its SSBIC initiative up and running before the end of 2021, while the money for CDFIs is expected to be allocated over the next year.
According to Innis-Thompson, TD plans to focus on markets it serves that are home to large Black and Hispanic communities, such as Philadelphia, Washington and Miami. The goal is to funnel loans into the hands of minority entrepreneurs that TD normally might not help on its own — and to entice them to shift their business to the bank.
“We would like to be the bank of choice for Black and Latin borrowers,” Innis-Thompson said. “We are being very purposeful in designing outreach efforts, programs and products to make sure that happens.”
The $411.6 billion-asset TD is already a leading Small Business Administration lender in its footprint, which stretches from New England to Florida. At the same time, “there are some small businesses that are either startups or that don’t necessarily meet our credit standards,” Innis-Thompson said.
CDFIs and SSBICs “are very skilled at helping businesses secure funding … and their credit criteria are a bit more flexible than a traditional bank’s,” Innis-Thompson added. “They’re able to serve the community in ways banks can’t.”
In announcing its new equity investment fund, TD joins a growing list of banks moving to provide support to minority small businesses.
Last week, Bank of America, which had pledged to invest $200 million in funds focused on minority small businesses, announced plans to boost its commitment to $350 million.
Meanwhile, PNC Financial Services Group in Pittsburgh, Huntington Bancshares in Columbus, Ohio, U.S. Bancorp in Minneapolis and BMO Harris Bank in Chicago have embarked on similar initiatives in recent months.
Increased support for minority-owned small businesses highlights the heightened attention banks around the country have paid to racial equity issues since the killing of George Floyd last year.
TD’s equity fund “will ultimately infuse capital and help stabilize [minority] small businesses, but it’s also about … breaking the cycle of disinvestment which systemically prevents communities of color from thriving,” CEO Greg Braca said in a statement.
“Small businesses are the heart of our communities, especially communities of color,” Braca added. “It’s up to us to help them succeed.”
TD Bank is a unit of the 166-year-old Toronto-Dominion Bank based in Canada.