Kinship-inspired lending opportunities help small business in Indian Country

Taking out a small business loan can be complicated, especially during a pandemic. But Change Labs’ Kinship Lending program is here to help Native American entrepreneurs access financing.  

Kristine Laughter, the Director of Change Labs’ Kinship Lending program, said the lending program started as a response to the pandemic when Native American business owners on the Navajo Nation were facing closures and lockdowns. Many Native American artists, vendors, and other business owners lost their ability to sell in public, which meant their income was drastically impacted. 

“One of the problems that our Native American entrepreneurs face, that Native Americans in general face, is they lack access to capital,” Laughter said. “We wanted to create a loan program that would help people during the pandemic and give them some money to get through it. We had no idea that the pandemic was going to go on this long.”

While the Kinship Lending Program helps business owners find their way in an uncertain time, it also helps first-time borrowers learn the ins and outs of what it takes to have a loan and how to manage one.

As a stepping stone to traditional financing, Kinship Lending looks different from loans from a typical bank loan.

“We do not run a credit check and we don’t require loan collateral. The loan program is based on the relationship we build with the borrower,” Laughter said. Traditional lenders require that a borrower has collateral, such as real estate or a home, before lending. This puts many Native American borrowers at a disadvantage, since 90% of Native land is owned by the U.S. government, which means most Native American entrepreneurs on the reservation are leasing their biggest assets. While there has been some effort to collateralize leaseholds, banks often lack the specialized expertise to value and accept alternative forms of capital such as business or home site lease, vehicles, or equipment. By not considering credit scores or assets, the borrowers are afforded an opportunity they wouldn’t get anywhere else. They are not punished for their credit score or for residing on trust land that they cannot own, and they are able to build good credit while keeping their business going.

“This next round for the Kinship Lending Program, we’re going to select 20 borrowers and we’re going to offer a financial education course with the program,” Laughter said, adding that once participants are approved for the loan, they’ll automatically be enrolled into the financial education course. 

“The reason that I want to offer financial education is because of my experience. I worked for a bank for over 15 years. I got to see first hand what our entrepreneurs on the Navajo Nation face,” she said.Through that experience, Laughter saw that many borrowers didn’t know how to take out loans or they didn’t know about the commitment it took to have a loan. 

“We’re going to start from the basics,” she said. 

This cohort of borrowers will learn about spending as well as create a spending plan and set some goals around saving. Borrowers will also learn more about filing taxes and creating a retirement account. They’ll even learn how to register their business with the Navajo Nation as well as the state. 

“Once they complete the program and they go through the loan program, they’ll become part of our Change Lab family, they’ll become alumni of the program and it’ll be cool to be able to build those relationships and build networks between themselves as well,” says Laughter. The application period for the Kinship Lending Program starts February 28th and will be open until March 20, 2022. The online application is available at: http://nativestartup.org/kinshiplending