Support Small Businesses in Hard Hit Communities Through the CDFI Fund

The Coronavirus could permanently destroy half of America’s small businesses. The average small business only has enough cash to survive 27 days. The government must act to save as many as possible. The CARE Act was a good start, but we need to do more. CDFIs – mission-driven lenders working in the hardest hit communities across the country – can help businesses get back on their feet.

There are over 1,000 CDFIs across the country with extensive experience providing patient capital to meet the needs of businesses and families in economically distressed communities. CDFIs also provide technical assistance and support to triage distressed businesses. This experience makes them uniquely suited to tackle the challenges facing businesses over the coming months. The quickest way to support CDFIs is through the CDFI Fund’s grant programs.

The CDFI Coalition urges Congress to provide an $1 billion appropriation for the CDFI Fund. 

How CDFIs Can Help

CDFI’s face two challenges as the economic devastation from the COVD19 pandemic unfolds.  First, they need to provide forbearance to small business borrowers over the next several months as social distancing and stay at home orders continue.  Second, as the nation emerges from the crisis, CDFIs will be called upon to provide working capital and other sources of flexible, patient financing necessary for small businesses to get back on their feet.

Throughout the last economic downturn CDFIs served as economic shock absorbers, providing flexible and patient capital, rigorous risk management, and commitment to the projects in their communities and the sustainability of their borrowers. While traditional borrowers fled economically distressed communities, CDFIs stepped in and filled the void.

In 2009, Congress made $100 million for the CDFI Fund under the American Renewal and Recovery Act for this purpose.  Of that amount, $90 million went to CDFI Financial Assistance Awards that were used to provide patient flexible capital to small businesses to help them recover from the great recession.

It took more than a decade for many communities to recover from the Great Recession. Some never did. The dire and unprecedented economic circumstances in rural and urban communities across the country demand a more aggressive response from Congress.

If Congress moves swiftly, $1 billion in supplemental stimulus appropriations can be included into the FY 20 appropriations round; quickly getting the money out the door. The CDFI Fund would ensure investment dollars help stabilize the communities hardest hit by the pandemic.

Projected Impact:

In FY 2019, CDFI Fund Program award recipients made 772,348 loans to small businesses, micro-enterprises, and consumers totaling $21.5 billion. That impact can be multiplied four-fold if Congress provides $1 billion to the CDFI Fund.