CDFIs Are Keeping Minority Businesses Afloat During The Coronavirus Pandemic
You may not recognize one when you pass it on the street, but community development financial institutions (CDFIs) are the lifeblood for minority businesses and communities.
CDFIs are private financial institutions that are 100% committed to delivering affordable lending to help low-income, low-wealth, and other disadvantaged people and communities.
Unlike traditional banks like Wells Fargo or Bank of America, CDFIs are profitable, but put the community in which they serve first. CDFIs provide financing for small businesses, microenterprises, nonprofit organizations, commercial real estate, affordable housing, and other projects; CDFIs spark job growth.
“What we know about disadvantaged businesses owned by lower wealth entrepreneurs in low- and moderate-income communities is that there’s a lack of both access and experience when it comes to preparation for financing, but–also after you receive financing–the expertise and the sort of exposure and the involvement or need to effectively manage through the financing venture,” Ted Archer, the head of small business philanthropy at JPMorgan Chase & Co, tells BLACK ENTERPRISE.
“CDFIs are both organized to do this kind of work, but also required according to the certification by the department of treasury. And it’s why we see partnerships with them through financing and through other creative programming be so effective, because they can offer capital but plus. It’s “the plus” that makes their work so effective, Archer added.
Well-known CDFIs include Carver Bank, One United, and Citizen’s Trust. These banks were important to low-income communities and minority entrepreneurs before the coronavirus pandemic, but now they may be the only reason you don’t see “for lease” or “for sale signs” draped all over these communities.
When the pandemic began shutting down businesses in March, the Paycheck Protection Program (PPP) was created to help small businesses stay afloat. However, many large banks ignored small businesses and instead secured funds for their biggest clients.
However, CDFIs and Black-owned financial institutions stepped up, and by June received $10 billion in additional PPP funding from the Small Businesses Administration to give out. Additionally, JPMorgan Chase provided NDC, a CDFI, with $50 million in capital used for the PPP.
NDC used the funds to help more than 260 small businesses across the country and help retain more than 4,700 jobs.
The list of businesses that were saved by the program is too high to count, but Jay Reynolds of WolfCreek Consulting, a Florida-based staffing firm, knows just how important CDFIs were to his business.
“I had a couple conversations with NDC and we went through the numbers and they were able in a fairly straight fashion to get that PPP funding, and it came along at a time where it was absolutely necessary,” Reynolds tells BLACK ENTERPRISE. “Through NDC and having that conversation with them, [it] helped us through some terrible things happening to the business. I don’t want to say close or lay off people, but I could tell you that they literally made a difference.”
Despite being a big bank, JPMorgan Chase has made significant investments in CDFIs before the pandemic. In 2018, the bank committed $3 million to help CDFI collaboration in Ohio’s three largest cities. In 2019 the bank committed another $3 million for a similar project in Memphis, TN.
Now with the $900 billion stimulus package being agreed to last month comes a second infusion of funds for the PPP. This time around, $12 billion will be specifically earmarked for CDFIs and Minority Depository Institutions (MDIs).
President-elect Joe Biden has also promised a third stimulus package and Kevin Goldsmith, the community development tax credits program manager for JPMorgan Chase, says there is still room for improvement when it comes to the PPP.
“CDFIs will continue to play an important role in the next package of PPP funds, and provide that technical assistance with small businesses to not only be aware of the program, but also to navigate and process those loans and the forgiveness to help those businesses.” Goldsmith says to BLACK ENTERPRISE.
As the pandemic nears its one-year anniversary, many small businesses are still fighting their way through the pandemic. Some businesses have had to adapt to redesign for the digital age, while others have had to go basic, interacting with the public on the street.
No matter how small businesses are staying open, Archer believes they deserve a ton of credit for hanging on during an unprecedented time.
“It speaks to the resilience and ingenuity of businesses, many of which are small and underserved and faced challenges well before the pandemic and well before the ripple effects of 2020 small businesses and small businesses that are owned by minorities,” Archer said.