Ensure small business survival during COVID-19 crisis: Fund the CDFI Fund
So much depends on us all getting things right, right now. This is true whether we are talking about social distancing, apportioning resources or resisting the urge to hoard what others also need.
Congress is negotiating a sweeping stimulus package to offset the cascading damage wrought by the coronavirus. The package includes $500 billion for two waves of direct payments to taxpayers and an additional $500 billion in loans for businesses.
To help small businesses specifically, those of us in the nonprofit small business lending space are coming together to ask Congress to apportion $1 billion of the $500 billion earmarked for businesses to go to the Community Development Financial Institutions Fund. The fund, which has strong bipartisan support, promotes economic revitalization in distressed communities throughout the country by supporting the work of the nation’s network of community development financial institutions, or CDFIs.
A supplemental appropriation of $1 billion to the fund will allow CDFIs across the country to leverage $12 billion in capital that will be deployed to communities in need.
CDFIs specialize in serving low-income, underserved and otherwise disadvantaged communities and entrepreneurs underserved by traditional lenders and banks. These business owners run the Main Street businesses that all of us turn to daily—the beauty salon, car repair shops, daycare centers, dog-sitting services and so on.
CDFIs–which exist in all 50 states and the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands–are uniquely positioned to assist small businesses across the country without delay. Indeed, CDFIs are at the front lines of disaster recovery in all forms–the Great Recession, hurricanes, wildfires, floods, and now, COVID-19. Our portfolios already contain the very businesses that are being imperiled by closures, layoffs, downsizing and uncertainty.
Such legislative action is not without precedent. In 2009, in response to the financial meltdown, Congress approved supplemental CDFI funding through the American Recovery and Reinvestment Act. The move allowed funding to be deployed quickly to CDFIs operating in low-wealth communities across the nation.
Funding once again needs to be deployed swiftly. We cannot let American small businesses fail—they are the true engines of the economy. Nearly 30 million businesses in the United States are small or one-person operations. Economically, they account for 99.7 percent of all employer firms, 64 percent of new employer jobs and 46 percent of private-sector output. Demographically, they encompass every race, religion, ethnicity, sexual orientation, education level and political affiliation and have a gender parity that is rare in the business world. They are America.
CDFIs are already rising to meet the challenge posed by COVID-19. In recent days, CDFI leaders have jumped into action by deferring loan payments, counseling small business owners in multiple languages, advising government officials and more. Many of us are working to put relief funds together to help small businesses across the country. The economic disruption in the low-wealth communities where CDFIs operate is only beginning, but already dire.
This morning I turned on NPR and heard an interview with Alicia Villanueva, owner of Alicia’s Tamales Los Mayas, and one of the businesses our CDFI has funded. An immigrant from Mexico who got her start selling her tamales door-to-door while working two jobs and raising three children, Alicia last year landed a contract at the Chase Center, the home of the Golden State Warriors. Now, with the Chase Center closed and restaurants shuttered, she stands to lose everything. Her 25 employees are worried about their financial future, as well.
But not if CDFIs like Opportunity Fund and others have anything to do with it.
CDFIs are mobilizing and ready to help small business owners like Alicia. Congress: Help us help them. Fund the supplemental $1 billion appropriation to the CDFI Fund.
Gwendy Brown is the Vice President of Research and Policy at Opportunity Fund, a community development financial institution and the nation’s leading nonprofit small business lender
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