Microloans, CDFI partnerships: How Greenwood will use big-bank funding

Greenwood Financial, an Atlanta challenger bank with a mission to confront the nation’s racial wealth gap, has raised $40 million from several of the biggest U.S. banks, which it says it will recirculate in the Black and Hispanic communities.

Greenwood, which launched in October, announced on Thursday a Series A round of funding from Truist Financial, Bank of America, PNC Financial Services Group, JPMorgan Chase and Wells Fargo. Mastercard, Visa, FIS, Banco Popular, TTV Capital, SoftBank Group’s SB Opportunity Fund and Lightspeed Venture Partners, Quality Ventures and professional football running back Alvin Kamara also participated.

The investors are supporting Greenwood’s efforts to create non-predatory financial products for Black and LatinX clients and to help those individuals and businesses build capital. They are also indirectly backing mission-driven lenders: Greenwood, through a newly announced partnership, will offer a debit card and an app through minority depository institutions and community development financial institutions.

“With collaboration from investors and the community, we can close the wealth gap in America and increase economic equality,” said Ryan Glover, who co-founded Greenwood with Atlanta rapper Michael Render, who is known professionally as Killer Mike, and civil rights activist and former Atlanta Mayor Andrew Young. “The new capital will allow us to better develop a robust digital platform of banking services starting with spending and debit accounts this summer and progressing to an entire suite of offerings — loans, mortgages, investment vehicles, etc. — in 2022. It’s more than encouraging that so many of the world’s top financial companies have chosen to invest in our enterprise.”

The startup is named after a neighborhood in Tulsa, Okla., that was once called Black Wall Street. In the early 1900s, the Greenwood district had Black-owned restaurants, grocery stores, hotels, jewelry and clothing stores, movie theaters, barbershops and salons, a library, pool halls, nightclubs, doctors, lawyers and dentists. Greenwood also had its own school system, post office, bank, hospital, and bus and taxi service.

A race riot erupted in 1921 over an accusation of sexual assault. Mobs of armed, white men descended on Greenwood, looted homes, burned down businesses and killed hundreds of Black residents.

Glover provided an update on the company’s progress and plans for the new investment. Here is an edited transcript of the conversation.

How did this funding come about? Did they reach out to you or did you pitch to them?

RYAN GLOVER: Since we talked in October, more than 550,000 people have joined our wait list, which is truly a testament to the need in the Black and LatinX community for financial empowerment. Literally two weeks after we announced on Oct. 8, Truist Ventures reached out to us. At that time we had 100,000 people on our waitlist. We shared with Vanessa Vreeland [head of Truist Ventures] and Dontá Wilson [Truist’s chief digital and client experience officer] our mission, which is simply to create non-predatory lending products. to help recirculate capital into the community and to provide banking capital to deserving borrowers.

The Black and Latin X communities disproportionately have not had access to capital to build wealth like other communities. That mission really resonated with Truist Ventures, and they led the round. Our $40 million in Series A funding represents more than just the amount of money that we were able to raise, but a mosaic of investment partners who are collaborating with us to solve this multi-generational financial problem in the community.

Did the companies reach out to you or were you proactive about contacting them?

We reached out to some of the financial institutions. Some heard about it and reached out to us. Every investor that participated in our Series A round of financing, I believe authentically and sincerely understands our mission and wants to support our cause.

“Many in our community are charged higher rates of interest that range from minimally appalling to extremely appalling,” says Ryan Glover, Greenwoods chairman. “That’s an archaic way, I believe, of solving the financial wealth gap problem.”

Creating non-predatory lending products has been tricky for companies. It’s been hard for people to figure out how to make loans profitably to an underserved community without charging a lot. What is the solution to that?

Overarchingly, I think many in our community don’t fit perfectly into a lender’s approval box. There are other factors that could and should be applied to determine creditworthiness, such as length of time on a job. Many in our community are charged higher rates that range from minimally appalling to extremely appalling. That’s an archaic way, I believe, of solving the financial wealth gap problem.

We’re looking at a micro-loan solution, because for a lot of people in our community [their money runs out before the next paycheck]. And many in our community just need a stretch of seven to 10 days to make it to the next pay cycle, but they’re gouged. We’re working on products that will alleviate the infamous [non-sufficient funds] charge that can really bury a consumer throughout the month. Two or three $35 NSF charges can be detrimental to a family. We want to eradicate that problem immediately. We are working with a number of institutions to try to solve that injustice.

It’s going to take a collaboration, a community, a village, if you will, to extinguish this multi-generational wealth gap. I like to say this problem will take an all-hands-on-deck solution. It will take collaboration and community to advance racial equality and financial empowerment. We’re fortunate to have other banks and financial service providers joining forces with us to help solve this problem.

In addition to that, our day-one mission has always been to collaborate with many MDIs and CDFIs across the country. Everyone’s hearing of the financial institutions that have helped us raise $40 million, but without the dedication and commitment of the Black banks in America, many in the community would have very limited banking options. So we celebrate the work they have done over generations.

We’re developing a digital banking program that we believe marries well with many of the Black banks in the country and, most importantly, authentically will benefit the community. That program revolves around a co-branded debit and spending card where we’ll share interchange with the MDI or CDFI and a loan program where Greenwood is the customer acquisition engine for close to 600,000 people in our community.

You took inspiration from such the tragic story of the Greenwood race riot.

There’s so much beauty that has come out of the Greenwood district. Most people think of the race riot that happened, but prior to that, the Greenwood district oozed in Black excellence, hence the name Black Wall Street. There was one factor that reigned supreme that I want to bring back into our community. And that revolves around the recirculation of capital. At one time, in the Greenwood district, one dollar recirculated 36 times in the community before it left the community, and that enabled the businesses there to thrive. Today, a dollar only circulates six hours before it leaves our community. That, I believe, is an atrocity that needs to be fixed.

That is why what we’re doing with our program is so crucial, the reason why I’m bullish on creating non-predatory lending products and I’m intent on providing banking capital to deserving borrowers. Because I understand that, in order to close the race gap, people in the community need access to capital, and if they don’t have it, it’s hard to thrive.

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