Before Tory Burch opened her first boutique in 2004 on Elizabeth Street in Manhattan, she designed clothes in her very own kitchen. Now Burch’s eponymous global brand has more than 125 freestanding stores. While the fashion designer was fortunate enough to raise enough funds to open up her first shop, she knows countless female entrepreneurs just starting out don’t have the same opportunity.
That’s why the purveyor of the $200 ballet flat shoes partnered with Bank of America in January to provide women entrepreneurs in the U.S. with access to affordable loans, mentoring support and networking opportunities. Now their program is expanding across the country. Through Elizabeth Street Capital, a program that lives within Burch’s foundation, Bank of America is working with Community Development Financial Institutions (CDFIs) to make affordable loans available to female entrepreneurs living in states like California, Texas and New Jersey. The financial giant has made an initial $10 million commitment to the program, but has every intention to add more money in the future, said Anne Finucane, the bank’s global chief strategy and marketing officer.
Bank of America already lends $10.7 billion annual to small businesses, but entrepreneurs who are just starting out like Burch did in 2004 often don’t qualify for a traditional bank loan. Also, female entrepreneurs struggle more than their male counterparts getting access to capital. Burch’s rise to fame made the bank realize that despite its expansive small business loan program, successful founders like Burch who should be granted loans could still be slipping through the cracks, Finucane said.
“Tory is a good partner. She is serious about it and she adds a caché to the program that is hard to duplicate anywhere else,” said Finucane. “This is the business we are in. Helping people with their financial lives. This is an early stage of investment that we may not have gotten to otherwise.”
In an interview with Fortune, here is what Finucane had to say about the genesis of the partnership and its plans for the future.
How did Bank of America initially decide to partner with Tory Burch?
We were introduced to Tory by a woman who works at Bank of America who happens to have been college roommates with Tory [Hayley Boesky, vice chairman of global markets at Bank of America Merrill Lynch.] She asked me if I would meet with Tory because Tory, as a part of her foundation, had established this effort to mentor female entrepreneurs, She was finding that one of the big issues was access to capital. We already do a significant amount of work with CDFIs, which can lend to men and women at earlier stages than a traditional bank can. We put the program in place and named it after her first store, which was on Elizabeth Street.
Why is getting small loans to women entrepreneurs important?
This is really not specific to women, but in a small business, without any credit history and without two years of showing some type of profitability, traditional banks are unlikely to lend. There was a lot of talk of micro-financing globally, but we can do this better in the U.S. as well. Tory knew how to build a multi-billion dollar empire, and she determined through this particular effort as she began mentoring women that access capital was an issue. Not everybody can get angle investors in for an idea and that is the truth of how this goes.
Why aren’t there more programs like this that exist?
There will be. There has been an economic contraction for the past several years. It is equally difficult to lend to those with no credit history, so you have to do this with an equal amount of optimism and conservativeness to know that you are helping someone establish a business for the long term and giving a loan that may never be repaid. We are trying to create a loan that they can afford while they still get mentoring on how to run a business.
What are some challenges that female entrepreneurs face that this program seeks to solve?
It is great to get women to come to mentoring events, but we have to go beyond the events. Clearly Tory is an enormous draw to anything, she is terrific and has a good personal story. This effort is entirely sincere and she showing up and thinks it thorgh and she is every bit involved as we are in trying to create access to capital. But that aside, we have to ask women questions like “What is your game plan? What need are you serving? What kind of suppliers do you need to call on? Where are going to get help to open your first storefront?” These very basic things have to be answered before starting a business.
What advice do you have for female entrepreneurs just starting out?
What we have to all do is think through what is the end game. How does your good idea become a true business? Then reach out to us or Elizabeth Street Capital or other organizations. There are many more resources now than there used to be. Getting a small biz loan has always been difficult though there are alternatives which I think can create real momentum.