Holy bankroll! Churches now loaning to startups
By Jenny C. McCune • Bankrate.com

Religious institutions are addressing not just the spiritual, but also the economic needs of their members and their neighborhoods. In increasing numbers, these institutions are raising funds to set up business incubators and finance startups.

"Ultimately, the problems in the inner city will be solved not by the federal government -- which is not throwing enough dollars at it or taking enough risks -- but by the private sector," explains J. Rody Borg, an economics professor and director of the Center for American Free Enterprise at Jacksonville University in Florida. "Most of these religious institutions are major players in their communities and are realizing they need to take on a leadership role."

Churches from Nashville to Detroit, from Cleveland to New York, have or are in the process of setting up programs to help businesses. Many are based in urban inner cities. Some, such as the Potters House Christian Fellowship in West Jacksonville, Fla., work in smaller cities or even in rural areas.

Wherever they're based, these religious institutions are taking on a number of economic development efforts. They range from churches setting up business incubators, to renovating buildings and then renting space at affordable prices to fledgling businesses, to establishing microloan programs. These programs are often tied into low-cost day care centers for working parents and training programs to help the underskilled break into the work force. There's a definite need for such assistance, particularly in nurturing new businesses.

"I think that there's ample evidence that someone of color or a woman, especially from the inner city, can have a hard time getting financing from traditional sources," says Borg, the college professor.

Lending a helping hand
Churches such as the Little Rock Baptist Church in Detroit are stepping up to fill the void. Little Rock church has an "investment club." Parishioners who participate in the club are asked to contribute $100 a month for a year. The pooled money is then used to make loans to start businesses. Currently, the club is considering bankrolling a Subway sandwich franchise and may purchase an office complex downtown to rent space to new businesses.

"As many of the entitlements of the inner city are getting dismantled by the government, the church has to have a net to catch these people," explains Rev. Jim Holley, the pastor for the Little Rock Baptist Church. "And we can only do that if we have revenue."

That's why, in addition to the investment club, the church has created a business called Country Preacher Foods to raise funds for its philanthropic efforts. It currently has a $1.2 million contract with Northwest Airlines to supply the airline with cookies.

The money isn't only used to finance businesses, though. The church uses proceeds from the business to fund college scholarships (it's currently supporting 83 college students) and also runs a homeless shelter, among other charitable causes.

Churches also stand to succeed in improving their neighborhoods since they are an existing part of the community already, rather than outsiders.

"They are used to dealing with the inner-city community," Borg says. "I think that locals would be understandably suspicious if I or some other stranger shows up with a handout."

Churches' efforts "are less likely to be met with suspicion," he says.

While they are becoming more common, these church-related helping hands also arevery local and personal in nature. There's no national or state organizations, no Web sites to go to; chances are, if you don't know your local minister, you won't stand a very good chance.

No church is an island
Some churches are finding it best to work together with other religious institutions and other profit and nonprofit entities. For example, FreshMinistries in Jacksonville is a faith-based nonprofit that combines the resources of several local religious institutions.

Its divisions include an urban ministries program, headed by Michael Bryant. FreshMinistries is a member of a broad coalition called Core City Neighborhoods Rebound Coalition. Other members include several academic institutions, business community groups and government officials, who serve "more in a supportive than a leadership role," Bryant says.

The coalition is setting up an incubator that will offer a sliding scale of rents to make office space affordable to different businesses. In addition to providing shelter, the new incubator will have an onsite staff to provide support and mentoring to incubator members.

The new incubator follows several other efforts by FreshMinistries to help foster businesses in Jacksonville. Last year, the organization applied and received an inner-city revitalization grant, which was used to provide microloans and commercial facade grants to local business entities.

"We looked at the issues of people not having enough money to deal with the basic necessities of life, in particular, not being able to escape the poverty cycles they were trapped in and we couldn't find any organization that was really address that in our community," Bryant says.

In addition to helping local residents, churches get another payback for improving their neighborhood's economy. According to Borg, "It also helps the church. People don't want to go to church if the local area is run-down and dilapidated. So the church itself benefits."

Jenny C. McCune is a contributing editor based in Montana

--Posted: Oct. 12, 2000