Banking on KC – Ruben Alonso of AltCap
Ruben Alonso of AltCap: Investing in Lasting Impact
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Kelly Scanlon:
Welcome to Banking on KC. I'm your host, Kelly Scanlan. Thank you for joining us. With us on this episode is Ruben Alonso, the CEO of AltCap. Welcome, Ruben.
Ruben Alonso:
Thank you. Glad to be here.
Kelly Scanlon:
So Ruben, AltCap as a microlender, who do you serve and what is your purpose?
Ruben Alonso:
Yeah, so AltCap is a very mission impact-driven. So as a Community Development Financial Institution or CDFI, we really try to target communities and businesses or entrepreneurs that are left out of the financial mainstream. So, with our small business loan products, which include micro loans, small business loans, even some tax credit financing, we really are trying to bring capital to those communities or businesses that are underserved or overlooked by mainstream finance.
Kelly Scanlon:
So, in some ways you close that gap.
Ruben Alonso:
Absolutely. I mean, that's a great word. I mean, we really try to fill gaps in the capital markets to really make capital more accessible to those businesses.
Kelly Scanlon:
You mentioned AltCap being a CDFI, what does that mean? And I know that there's also CDE. So how is that a CDFI different from a CDE too?
Ruben Alonso:
Yeah. Welcome to the alphabet soup. CDFI, like I said, is a Community Development Financial Institution and that's a specific certification that organizations entities can get to participate in a number of federal programs that are administered by the CDFI fund, which is part of the treasury department, which are used to essentially support bringing more capital into underserved communities or low to moderate-income communities. So, a CDFI designation really empowers institutions. And they could be tax-exempt organizations like AltCap or even a bank.
Ruben Alonso:
So, a bank could be a CDFI or credit union could be a CDFI. But with that designation, you have to meet certain requirements or obligations to demonstrate that you are in fact, bringing critical capital to communities and to borrowers like small business owners that need that capital.
Ruben Alonso:
We've been a CDFI since 2015-2016, but before that, we were a CDE or a Community Development Entity. So that's another entity that was created by the treasury department to facilitate a CDFI fund program called the New Markets Tax Credit Program. So CDE designation allows organizations to essentially utilize the New Markets Tax Credit Program to support investments in low to moderate-income communities throughout the country.
Kelly Scanlon:
Okay. So the CDFI is broader is what I'm understanding?
Ruben Alonso:
Correct. Yeah. CDFIs have a lot more breadth in terms of their ability to raise and deploy capital, different forms of capital. CDEs really are specific to the new markets tax rate program. That's how AltCap started, but we essentially became a CDFI to allow us to do, to bring other forms of capital to communities that we serve like micro loans or small business loans. And really access additional federal programs as the CDFI fund in the department of treasury.
Kelly Scanlon:
Let's talk about some of those funds, those lending solutions. I know that you have several. Just to name a couple, you've got AltCap, you've got Casey Home Rehab or talk about some of those.
Ruben Alonso:
But also, a lot of our lending and deployment capital is focused and targeted on people. So specific types of businesses or entrepreneurs. So AltCap program was really focused on bringing micro loans or small business loans to artists. We got artists are very entrepreneurial and could benefit from access to additional resources or capital. Not just grants or donations or friends and family capital that a lot of artists rely on.
Ruben Alonso:
We want for them to see themselves as entrepreneurs and access capital like any other entrepreneur would access, whether it's a micro loan or a small business loan through a CDFI like AltCap or maybe even a bank at some point. Some other targeted loan funds or loan products is on other specific businesses or types of businesses that we feel need more access to capital home rehabbers.
Ruben Alonso:
So we recently launched a home rehab loan fund a few years ago. The poor and small contractors throughout the urban core, who are rehabbing homes. Providing them access to capital to purchase abandon or vacant homes and rehab them. We've also got like you mentioned the Diversified Contractor Growth Fund, which is our minority and women business enterprise loan fund supporting MBE, WBE contractors that they can bid on and perform contracts in the construction industry. So there's some examples of, again, how we're both place-based, but also people based in terms of how we're focusing and targeting on the deployment of our capital.
Kelly Scanlon:
Right. So place-based, people-based. And the interesting thing is that they're very related because a lot of times the people that you're investing in say with home rehab program that you have are going to go back and spend those dollars on the projects in that community that they're a part of. So it's a win-win all the way around.
Ruben Alonso:
Yeah. We feel the opportunity for us to support home rehabbers and address the affordable housing issue in Kansas City is a critical effort to really support investment not just in our urban core, but bring people back to the urban core. There's by some counts, five to 8,000 abandoned and vacant homes in the urban core. If we can rehab those homes, that's an opportunity to bring people back into the urban core. Also, remove blight and a lot of these neighborhoods in the urban core and revitalize some of these neighborhoods.
Kelly Scanlon:
Talk to us about loan terms. When you say micro-lending, what kind of loans in terms of amounts, in terms of eligibility, who qualifies for these?
Ruben Alonso:
So for us, a micro loan is up to $50,000. And that's the definition of a micro loan according to the small business administration or SBA. So we follow those guidelines for what a micro loan is. In terms of the rates and terms of their loans that we make, it varies. We're very much lender that meets a business where they're at and try to be very flexible and have a lot of creativity in how we kind of structure and make loans to businesses.
Kelly Scanlon:
Are you still hosting your pitch competition?
Ruben Alonso:
We are. The AltCap Your Biz competition. We are in, I think, our sixth year now this year and excited about offering that as an opportunity to showcase some small businesses, and entrepreneurs throughout the Kansas City metro area and give them an opportunity to make their best pitch to win grant funds to support their business.
Kelly Scanlon:
And when's that going to be held again?
Ruben Alonso:
So it's typically during the Coppin Foundation's Global Entrepreneurship week so October-November. We'll have information on our website about the AltCap Your Biz competition. And what we initially asked for is a two-minute video that you submit with your best business pitch and then we'll take all those submissions and whittle that down to 10 finalists. And that will come in and make a formal presentation to our judging panel. And then we'll make the announcement of the top three businesses at Global Entrepreneurship week.
Kelly Scanlon:
You have several other programs as well, some target investors, some target neighborhoods. You mentioned, for example, the New Markets Tax Credits. Talk to us a little bit more about the purpose of those and how they work.
Ruben Alonso:
That program was created back in 2000. So, it's been around for a while, but it really was a program that was designed to support significant investments, catalytic investments in low-income communities. As a CDFI and CDE, we have the ability to access these federal tax credits from the department of treasury and use them to help support catalytic real estate development project or a job-creating small business investment in the communities that we serve. So it enables us to provide capital to those businesses or those real estate developers to support those investments in the communities that we're serving.
Kelly Scanlon:
You're also an affiliate of the Community Capital Fund. What does that affiliation allow you to do?
Ruben Alonso:
So Community Capital Fund was created back in 2011. It was a decision by myself and the board to see how we can use some of the revenues that we've generated from our tax credit financing portfolio, but also our small business, micro-lending to put that back into the community to support community development in the communities that we're serving. So Community Capital Fund really is focused on supporting neighborhood capacity building. And it does so through small grants that it provides to neighborhood organizations, community development, focused organizations, working in neighborhoods that are in the Kansas City metro area.
Kelly Scanlon:
You're getting funding in the hands of entrepreneurs, into the hands of neighborhood organizations. And then, also, tell us about your impact investing initiatives.
Ruben Alonso:
Yeah, absolutely. So, Equity Squared is the third leg of the stool as we like to call it. Really representing the full breadth of resources and capital that we bring to communities and how we support community economic development. So we have AltCap that provides tax credit financing, debt financing through small business loans and micro loans.
Ruben Alonso:
Then we've got Community Capital Fund that provides grants to neighborhoods and communities. And then Equity Squared is an impact investment affiliate that we created a couple years ago to support equity investments in communities that AltCap and CCF are supporting. So this is an entity that can raise and invest equity capital into businesses or real estate development projects that are supporting community and economic development in the Kansas City metro area.
Kelly Scanlon:
Give me an example of one that is active right now.
Ruben Alonso:
In the Marlborough neighborhood, there is a former school building that Equity Squared invested in to support the neighborhood in redeveloping that school building and creating an asset for the neighborhood, creating additional housing, as well as commercial opportunities in the neighborhood. So, really excited about how that continues to evolve and progress. But it was kickstarted with an equity investment by Equity Squared through a new investment model that we're experimenting with here in Kansas City called a Community Investment Trust.
Ruben Alonso:
Another investment by Equity Squared recently was in a home rehab or actually. Terrell Jolly is a client of AltCap but he was really looking to scale his home rehab business so he approached Equity Squared for an equity investment and Equity Squared recently made that investment to support Terrell Jolly and his home rehab work in the urban core.
Kelly Scanlon:
You mentioned Community Investment Trusts when you were talking about the new model. Tell us about that.
Ruben Alonso:
Yeah. So Community Investment Trust gives communities the opportunity or residents of communities the opportunity to invest in projects or even businesses in their neighborhood or in their community. And really allows them to participate in the wealth-building, wealth creation, prosperity that is generated from these investments in the communities. There's a lot of concern that outside investment or additional investments development in neighborhoods and communities lead to displacement of people or the residents of that community or neighborhood don't have an opportunity to benefit from the investments in their own neighborhood.
Ruben Alonso:
The Community Investment Trust model allows them to do that. But it takes a vehicle or an entity like Equity Squared to help facilitate those investments, even kickstart some of those investments with additional capital. So, that's what Equity Squared has done with a Community Investment Trust in the Marlborough community.
Ruben Alonso:
What a Community Investment Trust allows the residents to do is invest as little as $10 or $100 to have some stake in an investment in a community. And what Equity Squared in the Community Investment Trust model provides in that vehicle. What it provides is the ability to allow multiple residents to really participate in those investments with as little as $10 or $100 or more. But any amount of money a resident can invest just allows them to have more of an interest in their community and the investments that are happening in their community.
Kelly Scanlon:
So some ownership there. And instead of some outside, like you said, an outside investor coming in with one major investment and perhaps change the community quite a bit. This is in the number, and really in the passion that the residents and the businesses of that community have for their community is what's going to probably make that so effective.
Ruben Alonso:
Right. And when you have an outside investor coming in, investing in real estate or putting a business in a community, a lot of the return on that investment leaves the community. Using a Community Investment Trust through Equity Squared allows those returns to stay in the community and build wealth in those communities.
Kelly Scanlon:
You talked to us a little bit about the school in the Marlborough District, the older school building. And what are some of the other successes that you are seeing? What are areas of the city that are benefiting from AltCap besides the Marlborough District that you were talking about?
Ruben Alonso:
Yeah. I think generally, what AltCap has been able to do, especially over the last two years with the pandemic is really increased the visibility and awareness of the power of a Community Development Financial Institution. The impact it can make in a community in terms of supporting small businesses, supporting investments in communities, really helping to bring different forms of capital both public, private philanthropic dollars into communities that otherwise wouldn't be there. But for AltCap, a CDFI, helping to drive this capital into the community. So that's been a huge impact for Kansas City few years and we're excited about where we can take that and use the momentum over the last few years. Increase deployment of additional resources in capital into more communities and serve more small businesses.
Kelly Scanlon:
Yeah. Like you mentioned, getting started and creating awareness about the availability and about the presence of AltCap is part of the challenge itself. Talk to us a little bit about the Troost area. Are you involved in any projects there?
Ruben Alonso:
Oh yeah, we have for a while. So we've got probably 40 plus million dollars invested along the Troost Corridor between 25th Street and 40th Street going up toward Cleveland Boulevard. And that includes some New Markets Tax Credit investments includes some micro loans, small business loans we've made to entrepreneurs along that corridor also even includes a real estate development project that we're financing on Troost between Linwood and 31st Street that will hopefully, be the future home of AltCap.
Kelly Scanlon:
Fast forward, 10 years. What can Kansas Citians expect to see in that area in particular? And I'm focusing on that area because it is in the news so much. What can Kansas Citians expect to see as a result of AltCaps work? The entrepreneurs that you're working with, the neighborhoods that you're working with, tell us what you see.
Ruben Alonso:
I really hope to see other actors, other stakeholders, investors, lenders, not see these communities as communities where there aren't opportunities or there's not potential or this perceived risk. And I think what we've been able to demonstrate is that a lot of the business that we lend to are credit worthy and we hope to stairstep them and be a bridge for those businesses now to have a business banking relationship with a bank like Country Club Bank.
Ruben Alonso:
But also, I think we've demonstrated that these communities have a lot of potential and the people there, the entrepreneurs there have a lot of potential to create business opportunities, create jobs, bring goods and services to these communities that need it. So, that's what I hope to see and that we're helping to bring more capital, more resources, more investors, lenders to the communities that we're serving now.
Kelly Scanlon:
Ruben, we really appreciate your time here today. For anyone who's interested in learning more about the work that you're doing, the kinds of funding, maybe your neighborhood organization, an entrepreneur or someone who's just curious, what's the best place to go?
Ruben Alonso:
Best place is to our website, www.alt-cap.org, alt-cap.org. Just go to the contact us page and you'll see some contact information for our business development officers that any one of them can help entrepreneur or small business owner understanding the type of financing products that we provide. And if there's interest in pursuing a micro loan or small business loan, they're more than happy to help navigate, help that business owner or entrepreneur navigate our application process.
Kelly Scanlon:
Again, thank you so much for being here today and thank you for what you're doing to strengthen our community. We appreciate it.
Ruben Alonso:
Thanks for having me. Great to talk to you.
Joe Close:
This is Joe Close, president of Country Club Bank. Thank you to Ruben Alonso for being our guest on this episode of Banking on KC. There is potential all around us. Potential to change neighborhoods. Potential to lift Kansas City's economy. Potential to transform individual lives. Some of the ideas behind that potential stay sidelined because financing isn't available. AltCap is striving to close that gap with tailored financial solutions to meet entrepreneurs where they are. Country Club Bank is excited to be working with AltCap to bring some of these projects to life. Together, we can empower individuals, we can grow neighborhoods and we can be an economic catalyst for Kansas City. Thanks for tuning in this week. We're banking on you, Kansas City. Country Club Bank. Member FDIC.