A Recap of OFN’s 7th Small Business Finance Forum: How to Fill Gaps in Small Business Lending

Donna Fabiani

On June 26th and 27th OFN hosted the 7th annual Small Business Finance Forum, bringing together 108 CDFIs, 18 investors, 6 government agencies and 25 consulting agencies. More than 500 attendees converged at our event in Chicago to engage and dig deep on the challenges and opportunities for mission-driven small business lenders.

Lisa Mensah, OFN president and CEO welcomed attendees, “In 1999, 81 OFN members made 1,907 loans to small businesses and microenterprise. The amount totaled $82.5 million. Back in those days, the bigger, founding CDFIs were focused on affordable housing. Smaller CDFIs were our industry’s pioneers in small business financing and microfinance, especially among communities of color and women. They led the way in growing the industry’s small business and microfinance portfolio. In 2016, when OFN last tallied, 138 of our members closed 98,046 loans totaling $915.7 million. That’s a 51-fold increase in number of loans and an 11-fold increase in dollar amounts. These numbers reflect the power and excellence of OFN’s members – they go deep and really dig into areas needing attention and perseverance. We can track their work and show their impact. Thank you to our members!”

Mensah also thanked our 2018 sponsors: JPMorgan Chase (Lead), Capital One (Silver), Woodforest National Bank (Silver), and Fifth Third (Bronze).

The opening plenary, “A Small Business Success Story: Equal Exchange” featured Next City editor Oscar Perry Abello moderating a conversation about a little-known business model that creates community wealth– the worker-owned cooperative. Panelists Rebecca Dunn of Cooperative Fund of New England (CFNE) and CDFI borrower Daniel Fireside of Equal Exchange shared their story. Equal Exchange is a $70 million company with more than 125 worker-owners, but it began as an idea in the late 1980s that CFNE, a CDFI that specializes in financing cooperatives, “got it” and was the first financial institution to make a loan to the young cooperative.

Dunn and Fireside shared not only the success of Equal Exchange as worker-owned cooperative raising the bar on wages and community investment, but also demonstrated how this model can be a template in communities of persistent poverty.

Dunn said, “Cooperatives, as a business model, keep the money in their communities and resist ‘selling out’ because each worker is invested as an owner.”

“When you have a business that isn’t depending just on the owner but is dedicated to the welfare of its members, you model a society that people want to be a part of,” said Fireside. When it comes to financing small businesses in communities that are low-income this model does more than create jobs, it “creates high wage jobs and keeps the money invested in the local ecosystem.”

Dunn and Fireside participated in a joint interview after the forum about how worker cooperatives form, how they impact their community, and the growing trend of converting businesses to worker-owned cooperatives in the wake of the “Silver Tsunami,” or retirement of the baby boomers.

During the breakout sessions, attendees explored innovation in small business lending; CDFI Collaboration to increase reach; and the role of pricing in driving scale in microbusiness lending.

At lunch, attendees gathered to enjoy another plenary, “Filling the Gap: Business Models for Expanding CDFI Lending,” moderated by Lisa Mensah and featuring panelists Nick Elders of CRF USA; Connie Evans of AEO; Patrick Fitzsimmons of Mountain BizWorks; and Everette Sands of Lendistry. The panelists recounted their own diverse approaches, from the hyper-local Mountain Bizworks which serves a region of North Carolina, to a for-profit CDFI loan fund that is accessing capital markets in Lendistry.

Each panelist had an opportunity to answer the questions, “What is the problem you are trying to solve,” and “Where do you want the industry to be in five years.” The responses were as varied as the representatives themselves, but at the core it was all about creating economic justice and challenging some of the conventional norms that have driven the industry. Sands, for instance, is working to reduce redundancy through technology and reach a lending scale that no other small business lending CDFI has yet achieved. CRF is looking to solve the awareness challenge and to focus less on being a designated “CDFI” and more on how to engage with borrowers as trusted partners. And locally, Mountain BizWorks sees the challenge of retiring baby-boomer business owners in local economies that need its businesses to continue to not just survive but thrive.

Evans spoke from a slightly different vantage point as the leader of AEO: “I came to AEO to transform this industry…Entrepreneurs need to have choice, products and services, and real guidance that goes from startup through lifecycle… CDFIs are only penetrating about 1% of entrepreneurs seeking capital. I’d like to see that grow to 15% in five years.”

The remainder of day one was filled with energizing sessions and networking opportunities. OFN Members Meda and BBIF led a discussion on expanding lending in black communities; in other sessions attendees learned about addressing liquidity challenges or explored how to better serve veterans—nearly 25% of veterans are interested in starting a business! Attendees also experienced live tech demos from partners and exhibitors.

On the second morning of the Forum, more than 100 women gathered to attend the CDFI Women’s Network Breakfast where co-chairs Vicky Stein of CRF and Megan Teare of Wells Fargo updated the group on the growth in activity for the grassroots network, including status from close to one dozen chapters across the country. Ruth Barber of FUND Community Institute was on hand to announce their first research project will focus on the role of women in the CDFI industry.

Finally, Rachel Jacobson, Chief Business Development Officer of Landit, detailed the organization’s career development platform services for women. In 2017, OFN and Landit lauched a partnership to deliver professional development to CDFI women, with generous support from Morgan Stanley; the pilot cohort includes 25 CDFI women at all stages of their careers. Adria Moss of Pacific Community Ventures spoke powerfully of her Landit experience. OFN was very pleased to announce that the Morgan Stanley-funded OFN-Landit program would continue in 2019, making this special opportunity available to another cohort of CDFI women to participate in Landit’s dynamic platform; details will follow later this year.

During the remainder of the forum, practitioners and partners expressed an excitement about the work ahead in person and via social media:

“How is @OppFinance #SBFF coming to a close already?! We have enjoyed our time in Chicago, engaging with our CDFI peers and small business lending practitioners! Until 2019!”

You can see photos from the event on our Facebook page. Session slides are available on the Small Business Community of CDFI Connect (login required). If you have not joined CDFI Connect, you can do so now. 

A special thank you to all who helped make the Forum a dynamic and energetic gathering as well as an amazing networking and learning opportunity!