The Build Back Better Act making its way through Congress would deliver a historic investment in our nation’s economy, including significant funding to help our Main Street small businesses grow and thrive. From proposals to bring down the cost of health care (a perennial thorn on the side of small business owners), to investments in child care and paid leave that would be a boon to the small business workforce, to a $1.6 billion allocation for the Minority Business Development Agency, the Act takes small business needs seriously. 

One more thing we’d like to see is for the federal government to continue to invest heavily in Community Development Financial Institutions (CDFIs). 

CDFIs have gained widespread recognition for stepping up throughout the pandemic to effectively help millions of America’s smallest businesses hang on. They stand poised to broaden their impact over the long term, and as their name suggests, they are community-based. However due to their relatively small size, they face constraints on lending. They need investment capital, operational and capacity building resources from policymakers, philanthropists, and advocates to reach the scale they need to be impactful over the long term. 


That’s why CAMEO, a leading advocate for businesses of one to five employees in California, recently relaunched its CDFI Incubator to build capacity among existing lenders and train new CDFI staff and administrators. The CDFI Incubator includes grant opportunities, access to an online lending platform for small-volume lenders, workshops on microlending, underwriting and loan management, capital and networking opportunities. In short, it delivers the complex technical information needed to run a successful mission-driven lending program in the hopes that this training will lead to the creation of more CDFIs and boost the capacity of existing CDFIs to deliver the capital small business owners need to grow and thrive. We’re poised to do our part, and call on others to join us.

The pandemic, and the well-intentioned government response to deliver financial relief, demonstrated how millions of small business owners are disconnected from our mainstream financial institutions. For example, PPP, particularly its original iteration, left out large swaths of businesses. A Government Accountability Office audit discovered lending to “traditionally underserved” businesses — including those run by women, veterans, and minority owners — was disproportionately low throughout the program’s first year. Just 12 percent of Black and Latino-owned businesses received the full funding they needed and more than 40 percent of Black-owned businesses shut down in the early months of the pandemic compared with 34 percent overall.  

After advocacy from organizations like CAMEO and their small business allies across the country, the government reconfigured PPP and the trend improved. One large reason was that officials leaned on CDFIs, which delivered by outperforming other PPP lenders in many ways and by reaching businesses passed over during PPP’s first phase. Policymakers took notice of CDFIs’ success and in June Vice President Kamala HarrisKamala HarrisHispanics sour on Biden and Democrats' agenda as midterms loom Officer who directed rioters away from senators says Jan. 6 could have been a 'bloodbath' Trump and Biden should stop denigrating US elections MORE announced $1.25 billion in funding for CDFIs to support economic relief programs in underserved communities. 

But the job is not done. While the economy is rebounding, several indicators demonstrate the ride back to recovery could be turbulent. The September jobs report saw the unemployment rate fall, but the U.S. is not adding nearly as many jobs as many would have hoped. The economy could dip because of worsening supply-chain bottlenecks or another Covid-19 variant. According to a recent survey by Alignable, 80 percent of small businesses are worried about the impact of the Delta variant.

With federal small business relief programs coming to a close, CDFIs can help with an economic recovery still trying to find its legs—but they need the means to do so. The federal government has proposed $360 million in appropriations for CDFIs in 2022. That's more than they have received in years past but these are not ordinary times. CDFIs have proven their merit and their effectiveness; let's give them the financial support they need to keep our small businesses and our economy strong. Policymakers gave CDFIs $1.25 billion to do the job in June. They should match that again in 2022 whether it be through the budget process or another creative solution like a public-private partnership. 


Additionally, philanthropists can offer zero-to-low interest lending capital. And advocates can keep pushing for investments in CDFIs and policies that create more inclusive small business lending.

CDFIs proved their efficacy during the pandemic by assisting shuttered and struggling small businesses with nowhere to turn. Now it’s time to support CDFIs, to strengthen their networks, their organizations and their staff so that entrepreneurs and workers can chart a course for an economic recovery that reaches every community.   

Carolina Martinez is CEO of CAMEO, a California micro-business network, and an expert on small business and CDFIs.