Amid a stock market downturn and spiking interest rates, Community Development Financial Institutions (CDFIs) flourished. But with the rise of alternative lenders, reports say CDFIs had to shift their strategy to remain competition in the small business lending game.
Now, reports say CDFI network Opportunity Finance Network has just launched a new SME lending program aimed at increasing access to capital for female and minority-owned small businesses.
The new initiative is named the Small Business Finance Collaborative and will spend two years aiding 24 CDFIs and other financers in developing growth plans to up their SMB lending. According to reports, the program is financed from Goldman Sachs 10,000 Small Businesses and the Surdna Foundation.
But broader than increasing small business lending is the Collaborative’s efforts to educate small businesses and CDFIs. Reports say the SBFC emerged from an earlier training program for a group of 85 lenders. The curriculum was designed off of Babson College teachings and will help lenders and financers adjust their marketing strategies and other tactics.
Opportunity Finance Network’s CEO and President Mark Pinksy said that of the 700 CDFIs in operation today, about 300 of them serve SMEs, while the rest work with nonprofits and affordable housing initiatives. Pinksy said there were key differences in these three categories. “The overwhelming lesson that hit us right in the face was those in the other two areas [nonprofits and affordable housing[ had a tremendous support network,” he said. “For the small business area, it was almost non-existent.”
It was this lack of communication between companies and lenders that led to the development of the training program within the Collaborative. In addition to increasing small business lending, the SBFC will also look to establish deep connections in the small business community.
The 24 lenders chosen for the program operate with relatively small assets, Pinksy said, totaling about $600 million in outstanding small business loans. “It’s not enough,” Pinsky said. “We need to grow that.”
The program will look to see a 50 percent increase in this lending, he added, especially for women and people of color. According to Pinksy, it is a “hallmark” of the last five years that these business owners have struggled to access working capital.