At the close of the OFN Membership meeting in Albuquerque in 2008, at the Conference where Jim Collins spoke, a small group of OFN Members active in small business lending challenged me to do more to support them.
They were right when they told me that OFN did more for real estate lenders than for small business lenders, and they were right when they explained how different small business lending can be.
I do not think any of us understood then how much the Great Recession, which was just breaking across the economy’s bough at the time of OFN’s Albuquerque Conference, would reveal about CDFIs and small business lending.
It uncovered the fact that small businesses led by people of color face overwhelming obstacles to accessing credit and capital. We thought we knew that, but only when the Small Business Administration shared data in 2012 about how little lending was available to business owners of color—small business lending tracked by the SBA showed an 80+% drop in lending to Black and African-American-owned businesses between 2007 and 2012—could we quantify the problem.
The SBA’s decision to open the SBA 7(a) guaranteed lending program to loan funds was a direct response in the form of the Community Advantage program. CDFIs have embraced the program and are demonstrating what is possible.
We also earned about how the racially targeted predatory mortgage lending from the late 1990’s through the start of the Recession created new barriers for small business owners of color. For most small business owners, home equity provides the capital for their businesses, and the racially disparate negative impact of predatory mortgage set business owners of color back before they even started.
We learned that CDFI small business lenders were eager to work together, share lessons learned, collaborate, and build out the sector. The robust successes of OFN’s offerings under the Goldman Sachs 10,000 Small Businesses Financing Initiative, OFN and Starbucks’ Create Jobs for USA platform, OFN’s Small Business Finance Forum , and more recently Wells Fargo’s Diverse Community Capital are proving that our CDFIs are ready and able to step up.
The CDFI Small Business sector is blooming. CDFIs are innovating, partnering with new allies, investing in financial technology (fintech), and building both capacity and reputation. While the small business credit space is bustling with change—think marketplace lending—CDFIs are playing an increasingly important role. And that will grow.
OFN is adding a new online platform and education campaign to support small businesses. Venturize is a very exciting, very different approach for us. It is a way to promote CDFIs to small businesses—particularly small businesses owned by people of color, young entrepreneurs of color, and small business owners looking to technology for credit solutions. But it also is a way to use the collective CDFI voice to tell the world that small businesses are not captive to abusive lenders.
As we get ready for OFN’s 5th Small Business Finance Forum in Chicago, June 8–9, I hope you will join OFN in preparing for the future of small business finance.
Image courtesy of Colorado Enterprise Fund, who funded Dawn Jump, owner of Jumpin Good Dairy.