The aftermath of the stock market crash was a busy time for Community Development Financial Institutions (CDFIs). When traditional bank lending hit the skids, these lenders to projects and businesses in low-income areas stepped in to try to fill the gap. But it also was a time when many in the CDFI world realized they had to step up their game, especially as a new crop of lenders charging exorbitant interest rates started to sprout.
With that in mind, Opportunity Finance Network, a national network of CDFIs, just announced a new program to boost small business lending, particularly to people of color and women. Called the Small Business Finance Collaborative (SBFC), with funding from Goldman Sachs 10,000 Small Businesses and additional support from Surdna Foundation, the two-year effort aims help a select group of 24 CDFIs and other organizations develop growth plans that can significantly increase small business lending. In some cases, that may require participating groups to undergo a major culture change, with different marketing approaches and buy-in from their boards.
The SBFC builds on lessons learned during a previous training program consisting of three two-day sessions for 85 lenders, with a curriculum adapted from 10,000 Small Businesses that was designed by Babson College.
For example, along with small businesses, CDFIs also work with affordable housing projects and nonprofits. Of the 700 or so CDFIs out there, according to Mark Pinksy, Opportunity Finance Network’s president and CEO, around 300 serve small businesses.
“The overwhelming lesson that hit us right in the face was those in the other two areas had a tremendous support network,” says Pinsky. “For the small business area, it was almost non-existent.” According to Pinsky, at their first meeting, they were stunned at how little communication the organizations had had with each other.
The SBFC, among other goals, will try to address that problem by helping to forge connections and ways to share resources. In addition,”We decided to create a sub-group of small business lenders in our network and work with them intensively to accelerate the pace of their financing,” says Pinsky. The 24 organizations combined are pretty small: assets of about $862 million with over 7,500 small business loans outstanding totaling nearly $600 million. “It’s not enough,” says Pinsky. “We need to grow that.” He hopes to see a 50% increase in all, although he’s aware that might be too optimistic.
There also will be a forum for 150-175 small business lenders to be held at a June conference in Chicago.
“One of the hallmarks of the last five years is that it is has been particularly difficult for people of color and women to get access to capital,” says Pinsky. “We want to increase the supply of credit.”
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