LENDING INSTITUTIONS- Traditional lenders such as banks, micro-lenders and even the SBA allocate money, but then expect a scheduled monthly repayment program with interest. Disenfranchised people have historically paid disproportionately higher interest rates on these types of loans. Moreover, paying back a loan has had a crippling effect on many businesses that are trying to establish themselves. There are many reasons why 50% of businesses fail in the first five years and this is one of the primary ones. This is why TOHF is not a traditional lending institution. We are motivated to create as many successful businesses as possible. Eliminating a suffocating monthly mandatory loan repayment from our clients will benefit their morale and chances for success. A significant difference from traditional practices is we don’t charge interest.

VENTURE CAPITALISM (which includes Angel Investors)- A form of investing where money is put into a business for a percentage of the returns. TOHF does practice investing money and resources into promising business ideas, but we have several significant differences on how we invest:

Difference #1- Venture capitalists own a percentage of the company they invest in. Usually it is a significant amount. TOHF doesn’t own any of the businesses we work with.

Difference #2-Venture capitalists usually invest large sums of money (generally over a million dollars) and expect to get a very high return on their money. TOHF is interested in investing in people. We give clients enough money (based on an action plan that is created with our professionals) to give their business a real opportunity to flourish.

Difference #3- There is a clear divide between what venture capitalists are interested in and what TOHF is creating. Venture capitalists are constantly on the lookout for businesses to “hit a homerun” with. They are very selective in what they will invest in and many great ideas are bypassed because venture capitalists are only looking for businesses that will explode to maximize their profits. TOHF is more focused on economic empowerment and community building for African Americans. We are looking for ideas that make good business sense that will be an integral part of a large scale African American renaissance.

Difference #4- This is a significant philosophical difference between our two approaches. Venture capitalists are usually very eager to pull money from their investment. They depend on the period of explosive growth (which usually happens after the fifth year) to maximize their profits. Contrast this to TOHF where we require businesses to reinvest half their profits back into their business. Our role is to facilitate business growth as opposed to maximizing profits.

Difference #5-Venture capitalism is really about getting a big return on your money. When profits are made, they are split according to what the ownership percentages look like. Venture capitalists often squeeze too much money out of a business to get these high returns at the expense of the overall well being of the business. TOHF, with our commitment to empowering disenfranchised communities economically, does something radically different. We understand that the essential component to our vision is to create strong and vibrant businesses. Therefore, we must nurture them in their formative years. We insist that clients invest half of their monthly profits back into their business. This truly underscores what we are all about.

Difference #6-Venture capitalists often take primary ownership of the companies they invest in and also control the direction of how the business will move forward. It is not uncommon for them to literally “run the show”. TOHF does not take any ownership in ventures we invest in. Furthermore, while we will have input, our clients will run their businesses. We provide the training so that budding entrepreneurs can eventually branch off without us.