Education Advisory Services
MBDI's Capital Access Fund
Key to a contractor's success is access to external sources of working capital and collateral. MBDI seeks to establish a Capital Access Fund to help address the issue of inadequate capitalization that has posed a longstanding barrier to minority contractor growth. Within the $500,000 to $2 million contract price range, capital access is of particular importance because project and company financing become more important during the bonding approval process. In most cases, a contractor will meet the bonding underwriting criteria for both character and capacity. However, many will not meet the underwriting criteria for capital. If the contractor does not have access to 10-15% of the project value available to fund the job, he or she may not be able to mobilize the site, make payroll, or pay suppliers, which could stop work. Access to capital is critically important because surety underwriters need the assurance that risks will be minimized. Reducing the potential risk of loss for the underwriter opens the doors to bonding opportunities for emerging contractors.
The fund will be utilized as necessary to both offer collateral to leverage bonding for the emerging contractor and to provide short-term bridge loans for project initiation costs such as mobilization, payroll, payments to subcontractors, and the purchase of supplies and equipment. Access to the fund will allow contractors the opportunity to bid on jobs that would not otherwise be possible. Working with the guidance of MBDI and oversight of funds control,13 contractor participants will be able to apply all of the new knowledge and skills acquired through the micro and macro-educational components of the education advisory services. As they successfully complete assisted projects, they build equity in their business, and grow sustainably so that they will ultimately not require assistance.