Connie Smith, the guest author, is SVP, Diverse Community Capital Program Manager for Wells Fargo.
In 2015, Wells Fargo launched the Diverse Community Capital (DCC) program in response to issues identified in a Gallup Survey commissioned to gain deeper insight into the attitudes, needs, and motivations of diverse small business owners. The national survey’s findings revealed that diverse small businesses were challenged to access the credit needed to launch or grow their business. This is just one of the findings that prompted our $75 million commitment to support CDFIs serving diverse small businesses. Since the program launched, more than 180 organizations have submitted an Interest Form describing the access to capital gaps in their target markets and their strategies to address those gaps.
Through five rounds of funding, 69 CDFIs have received more than $70 million in capital to increase lending and development services to diverse small businesses. Forty-seven of these CDFIs have diverse leadership, including 14 having Black or African American leadership.
DCC Awardees are reporting annually and providing data associated with the program's goals. After two years of reporting, DCC Awardees have closed more than 8,000 loans totaling more than $391 million to diverse small businesses. As a result of accessing the capital and development services they need to launch or grow their business, these borrowers have retained more than 21,000 jobs and created more than 15,000 jobs (these figures are specific to Year 2).
Some additional metrics from the Year 2 Report:
- Awardees closed over $284 million in loans to diverse small businesses. This represented a 53 percent increase year over year for the first eighteen awardees and a 65 percent increase for subsequent rounds. Diverse small businesses received 83 percent of all awardees' business loans.
- While future annual reports will allow for analysis of longitudinal results, 2017 business lending distributions by race and ethnicity reveal that Hispanic or Latino and Black or African American owned businesses received the most loans.
- Diverse small businesses received 72 percent of all business development services offered by CDFI awardees. The top five development services offered related to fundamental business acumen: financial projections, cash flow management, bookkeeping and financial statement, business planning, and financial literacy.
- 73 percent of awardees reported at least one new or changed program, product or process designed to increase capital deployment.
In addition to the financial capital available through the DCC program, awardees are benefiting from social capital offered through and curated by OFN. These activities have included access to an online learning community, working groups focused on topics of interest identified by the awardees, mentoring, and consulting. Awardees have convened primarily via webinars and conference calls, but also in-person at OFN's annual Small Business Finance Forum and Conference.
While the original $75 million commitment will be met this year, Wells Fargo has committed an additional $100 million in grant capital to continue and expand the DCC program. Beginning in the fall of 2018 and through 2020, DCC will offer two unique funding opportunities on a rotating schedule.
- Capacity Building Grants: represents the continuation of the existing program, the hallmark of which is very flexible capital for capacity building. CDFIs awarded funding in the original commitment will be eligible (to extend their work) and the program will continue to be open to new candidates.
- Activator Grants: a limited number of grants to support more focused work on the part of CDFIs that are ready to activate strategies with the potential for industry or market replication.
CDFIs awarded funding in the original commitment will be eligible for both opportunities and both will continue to be open to new candidates.
Additionally, a portion of the new commitment will be available for CDFIs focused on support of diverse small businesses to prepare for or in response to catastrophic events. Going forward, DCC capital will be part of response planning conversations at Wells Fargo.
OFN will continue to play a role in the DCC program, offering social capital activities to build support networks and infrastructure among CDFIs.
We’re hosting a webinar on July 18 to provide information on the two grant opportunities, including eligibility requirements and selection criteria. It will also give you an opportunity to ask questions on the program components and review process.
The webinar is open to all organizations interested in learning more about the program. Round 1 of the new Activator Grants program component opens August 1 and Interest Forms are due on August 20.
Click here to register for the webinar.
Wells Fargo looks forward to continuing and expanding our commitment to CDFIs as they provide a full spectrum of resources for the growth and success of diverse small businesses.