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Beyond Credit Scores: Wins and Lessons from One Year of Character-Based Lending

To date, our CBL Pilot has deployed $380,000 to ten Black-, Indigeneous-, and Asian-owned businesses around the country.

Authors: Eric Horvath, Ana Ramos, Manager of Impact Investments

Have you ever wondered what would happen if the field of investment actually empowered those closest to directly impacted communities to make capital deployment decisions? This very question has been core to Common Future’s work — particularly fundamental to our Capital Strategies team. Our team officially kicked off work by teaming up with Community Credit Lab, and community partners MORTAR, Native Women Lead, and ConnectUP! Institute to launch an $800,000 Character-based Lending (CBL) pilot.

We knew that the idea of lending based on a recipient’s character and community ties was not new, but due to the lending industry’s history of inequitable practices — such as a reliance on racist credit scores — we knew there was an imperative for improvement and innovation. Character-based lending was not built to compete on lending metrics with traditional banks, community development financial institutions (CDFIs) or financial technology companies that provide access to capital; it was built to show that we can successfully shift power alongside shifting capital.

Ultimately, we built a community-driven loan fund — designed by community partners from the ground up — to provide right-sized loans with non-extractive terms to undercapitalized BIPOC businesses. To date, CBL has deployed $380,000 to ten Black-, Indigeneous-, and Asian-, women-owned businesses around the country, using community-centered underwriting criteria, equitable referral and approval processes and culturally competent follow-on support.


At Common Future, we are committed to incubating, co-creating and funding experiments that will usher in a new, more equitable economy. A year since launch, here are some things we’ve learned through running our CBL pilot:

  1. Trust as the Default
    Trust isn’t built overnight, nor is it necessarily best cultivated in times of crises. It’s certainly not best forged solely when it’s convenient. When we started CBL, we didn’t do an RFP or ask for warm introductions to unknown community partners; we went straight to people we knew that had come from the communities they served, had an established track record of supporting local, underserved BIPOC businesses, and wanted to deploy capital — but faced structural barriers to establishing their own funds.

    This long-standing and continuously maintained trust has created a caring and constructive dynamic between all of CBL’s partners. Though CBL was developed around the time of 2020’s racial reckoning, where many corporations and capital providers rushed to fund CBL’s target demographic, we built it with partner input and ownership as a north star, to ensure long-term buy-in and focus on impact, even after these issues faded from the news.
  2. Community-defined Success
    As Black, Indigenous and people of color — and as relatively lower power and under-resourced organizations in general — our partners too often have to explain to funders and investors that their people are worth fighting for.
    Rather than ask our partners to prove their worth, or to require them to satisfy our needs and interests, we empowered community partners to define success for themselves. By taking this approach, we gave voice to our partners’ preferences, lifted up their expertise, and their unique, community-centered approaches. Thanks to this approach, we have witnessed the brilliance of the 5 Rs of Rematriation in action, and the implementation of a Happiness Quotient, to test if access to this capital was improving the well-being of entrepreneurs.

As part of defining their own successes, community partners designed their own paths to get there. The community partners’ used their own insights and experiences to uniquely operate referral and approval processes that would work best for their ecosystems: a cohort-based model where there was an open invitation to apply and set schedule for review and approval; a case-by-case approach, with recruitment and application happening over a series of months.

  • Troubleshooting Together
    No one could have predicted the flood of grant and affordable capital directed to CBL’s target demographic over the last few years, which made CBL’s loans (relative to other options at the time) less attractive to businesses. We believe this slowed deployment in some regions, but rather than blame our partners for not deploying quickly enough or encouraging them to loosen their lending criteria, we came together and openly discussed what we felt the challenge was and how we could come together to best address it.

    CBL’s priority has always been the betterment of its borrowers and community partners — not getting loans out at all costs. This core priority guided our actions even as the funding ecosystem faced sudden, unexpected shocks, such as a sudden influx in deeply affordable capital.

We have been able to create a welcoming and open environment to collectively share wins and challenges between all five organizations involved. Because each community partner has different approaches, our time together as a full team is used to ask questions, raise concerns, and learn in an open and safe environment. It is this dynamic that has led to less fear, greater collaboration and workshopping that feels organic and authentic.

What’s Next?

We are halfway through the Charter-based Lending pilot’s deployment period. Based on our experiences to date, we are as emboldened as ever to dig deeper into non-traditional approaches and more community-powered partnerships in impact investment.

As for Common Future, and other co-created funding projects, we are currently fundraising for our next pilot. Revenue-Based Finance (RBF) will focus on flexible repayment loans for BIPOC businesses in St. Louis and Tucson. With community-driven terms and structures, we are building on the same approaches of collaboration and empowerment values that we used when we built CBL: co-creating ways for good ideas, ones that uplift BIPOC communities, and come from people in those very communities core to Common Future.

Keep your eyes out for our Revenue-Based Finance pilot later this year. In the meantime, if you’re interested to learn more, please reach out.

We’d love to be in community with you — Eric and Ana

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