This post was written by OFN Blog guest author Kim Erlichson, Vice President of Corporate Communucations, Wells Fargo.
In April 2020, Wells Fargo CEO Charlie Scharf made an industry-leading commitment to donate all gross processing fees from the Paycheck Protection Program back to the small business community. On July 9, the company revealed details of an approximately $400 million effort to help small businesses impacted by the ongoing COVID-19 pandemic keep their doors open, retain employees, and rebuild. Through Wells Fargo’s new Open for Business Fund, the company will engage nonprofit organizations to provide capital, technical support, and long-term resiliency programs to small businesses with an emphasis on those that are minority-owned businesses. Importantly, CDFIs are a centerpiece of the new Open for Business Fund and the first grant cycle, opening July 9.
“By donating approximately $400 million in processing fees to assist small businesses in need, Wells Fargo’s Open for Business Fund creates opportunities for near-term access to capital and addresses the road ahead to meaningful economic recovery, especially for Black and African American entrepreneurs and other minority-owned businesses,” said Wells Fargo CEO Charlie Scharf. “Wells Fargo is committed to helping small businesses impacted by COVID-19 stay open and get back to growth.”
According to data from Wells Fargo’s June Gallup/Small Business Index, more than half of small business owners surveyed expect either stagnant or decreasing revenues in the coming twelve months. In specifically oversampling African American, Hispanic, Asian, and women business owners, June’s survey also observed that 52 percent of these owners felt the U.S. economy was in a recession or depression, while 26 percent said they did not feel very prepared or at all prepared for the economic downturn from the pandemic.
“CDFIs have a proven track record of mobilizing quickly to adapt to small business needs and, in times of crisis like this, we know the CDFI industry is vital to getting capital and technical assistance to the small business owners that have been hit hardest, particularly in ethnically and racially diverse neighborhoods,” said Jenny Flores, head of small business growth philanthropy at Wells Fargo. “We see the new Open for Business Fund as a catalytic force at a time when entrepreneurs need us most. We’re not keeping any processing fees we would have received; instead Wells Fargo is directing money back out into the small business community to ignite momentum.”
The Open for Business Fund’s initial grants will allocate $28 million to CDFIs, aimed at empowering Black and African American-owned small businesses, which are closing at nearly twice the rate of the industry, according to the National Bureau of Economic Research.
Among the first grantees are:
- Expanding Black Business Credit Initiative (EBBC) will support the launch of the Black Vision Fund to increase the flow of capital to Black-focused CDFIs for transformational work to close the racial wealth gap in African American communities. The CDFIs will also receive capital for urgent deployment to impacted businesses in the Mid-Atlantic, Southeast, and Midwest.
- Local Initiatives Support Corporation (LISC) will provide grants and low cost capital to more than 2,800 entrepreneurs with a focus on preventing loss in revenue, sustaining employment, and averting vacancies among vulnerable small business owners in urban and rural markets nationwide.
But, this initiative is just getting started, with approximately $250 million focused on grant capital infusion for CDFIs to increase their lending and services. Beginning July 9, the Open for Business Fund is accepting applications from CDFIs and special purpose funds formed by CDFIs serving racially and ethnically diverse small businesses, open now through August 7. Additional grant cycles focused on technical assistance and recovery and resiliency will open later this year. Learn more on the Wells Fargo website.
This effort builds on Wells Fargo’s Diverse Community Capital program, a $175 million program that, in collaboration with Opportunity Finance Network, has enabled more than ninety CDFIs to finance $1.6 billion in loans and offer 1.8 million hours of training to diverse small business owners, which have helped them sustain 195,000 jobs.