TILT Forward Initiative and DreamFund (Association for Enterprise Opportunity)

Year: 2016 Geographic Region: USA

Criteria Met:
  • Catalytic
  • Discrete
  • Mid-Implementation
  • Unexpected
About the Project
The Situation
The Roadblock
Open Road's Response
The Situation

TILT Forward and DreamFund are innovation initiatives of the Association for Enterprise Opportunity (AEO) – the national trade association for US microfinance and micro business that develops programs and advocates for low-wealth and underserved entrepreneurs in the US. For more than 25 years, AEO and its hundreds of member organizations – primarily financial institutions dedicated to providing responsible, affordable financing to low-wealth entrepreneurs – have provided capital and services to enable underserved entrepreneurs to start, stabilize, and expand their businesses. In addition to contributing to economic growth, these entrepreneurs are then economically empowered to support themselves, their families, and their communities.

Following the US financial crisis, large banks drastically reduced lending to small businesses leaving small business owners with extremely limited options when needing access to capital. In order to meet the needs of low-wealth entrepreneurs, AEO developed the TILT Forward Initiative including DreamFund and myWay to Credit.

TILT Forward is a strategic initiative to coordinate US microlending organizations, to make sure that gap created in the loan market following the US financial crises is filled. AEO’s DreamFund expands responsible credit options available in low-wealth communities. DreamFund partners with fintech lenders that have with advanced credit algorithms and microlenders in specific communities that can benefit from expanded product sets and below-market pricing. DreamFund takes on the risk of the approved loans while paying fees to microlenders and by doing so encourages lending to local small businesses and entrepreneurs.

The Roadblock

AEO was successfully implementing TILT Forward and DreamFund when in 2015 they hit two unexpected obstacles in their funding streams: the funder that had been providing low-interest lines of credit had an internal restructure that delayed the disbursement of capital; and at the same time, the principal organizer of a group of social investors that promised to fund TILT Forward, passed away unexpectedly.

Both of AEO’s expected short-term sources of capital fell through for reasons that no management team could anticipate, and as a result, the next rounds of funding were delayed. Not only did this put the low-resource entrepreneurs that TILT Forward and DreamFund served at immediate risk of losing access to capital, but it also threatened the reputation of the AEO programs.

AEO had gone to great lengths to persuade its membership base – financial institutions focused on community development – that their odds of success were higher through participation in TILT Forward and DreamFund. Unless AEO was able to deliver through the initiative, they feared skeptics would strengthen their resolve to not participate and the hard won momentum would be lost. If early adopting members withdrew from TILT Forward, then the probability of making affordable and responsible capital available at scale would decline considerably.

Open Road's Response

Early 2016, Open Road deployed a bridge loan of $500,000 to AEO’s TILT Forward Initiative and DreamFund.

This loan immediately enabled 20 small business owners in low-wealth communities to access capital at rates well-below market, saving each nearly $2,800 on average and providing the microlenders with an average of $1,200 in income from each loan.

The longer-term potential for the loan is a transformational impact on small business owners and the low-wealth communities in which they operate; on nonprofit community lenders whose missions are built around making affordable capital available responsibly; and capital flow into low-wealth communities.

Since the loan, AEO’s TILT Forward Initiative and DreamFund have had great success. In the Fall of 2016, AEO entered into a multi-year, $1.9 million partnership with JPMorgan Chase. Through this partnership the AEO will expand its infrastructure, connecting more low-wealth entrepreneurs to microlenders, ultimately transforming underserved communities and small businesses.

AEO repaid its loan in full in August of 2017.