Calvert Impact Capital, Community Reinvestment Fund, USA, and 60 Decibels release new research as small business recovery programs surpass $210 million in lending
Mar 15, 2022 | Bethesda, MD
On the second anniversary of the start of the pandemic in the U.S., Calvert Impact Capital, a non-profit investment firm, and its partners released new research demonstrating the impact of its recent small business recovery efforts. Together, their recovery programs made loans to more than 3,500 small businesses in 18 states and the District of Columbia since July 2020.
Calvert Impact Capital, Community Reinvestment Fund, USA, and more than 25 Community Development Financial Institutions (CDFIs) came together during the pandemic to build recovery programs that expanded access to credit for un- and under-banked small businesses. These programs were built to strengthen and grow CDFIs, which acted as critical economic first responders throughout the last two years.
60 Decibels, a leading impact evaluation firm, was engaged to evaluate the impact of expanding access to credit during periods of economic hardship by speaking directly with the small businesses that were affected by COVID.
“As we apply lessons from the pandemic to structural barriers in our financial system, we looked beyond the numbers to understand the role access to credit plays for small businesses,” said Beth Bafford, Calvert Impact Capital’s Vice President of Strategy. “These insights help us build more responsive and inclusive solutions going forward.”
60 Decibels studied how access to credit contributes to income creation and wealth building for entrepreneurs, particularly businesses owned by women and under-represented racial and ethnic groups. In a study of the New York Forward Loan Fund, one of the first recovery programs in the market, the results were promising. Among loan recipients:
- 68 percent did not have good alternatives to gain access to credit
- 68 percent reported an improvement in their ability to maintain their finances, while 57 percent reported an increased ability to maintain jobs
- 55 percent reported an improvement in employees’ quality of life because of the loan
- 58 percent reported a decrease in stress levels when they accessed the loan
- 42 percent said they would have temporarily or permanently closed their business if not for the loan
“There is a human behind every data point and listening to these small business owners provides new insight on the impact of access to capital - directly from those who matter most,” said Lindsay Smalling, Head of Sales at 60 Decibels. “With all of the collaboration and innovation that has gone into structuring these funds and designing a unique loan product, this feedback from borrowers provides essential outcome data to support scaling what works.”
For full research results, please see here: Insights from the New York Forward Loan Fund
The New York Forward Loan Fund was seeded at the start of the pandemic by New York’s Empire State Development and Homes and Community Renewal and administered by LISC’s Strategic Investments team. It attracted capital from nine leading financial institutions and four foundations to create a $100+ million program. Ascendus, Community Preservation Corporation, NDC’s Community Impact Loan Fund, Pursuit Lending, and TruFund Financial Services used this available liquidity to successfully originate more than 1,700 loans to small businesses, nonprofits, and small landlords. The structure of the New York Forward Loan Fund has been replicated in programs across the country.
“We moved quickly to bring resources and technology to Community Development Financial Institutions to expand their ability to help small businesses reopen safely, pivot their business models and build resiliency to bring back revenues,” said Patrick Davis, Senior Vice President at Community Reinvestment Fund, USA. “State and local governments, along with leading institutions joined us in creating new financial and operational structures to get capital to the most underrepresented businesses.”
At a time when many banks were pulling back credit, the small business recovery programs blended capital to offer affordable, flexible small business loans. They have purchased more than $210 million in loans from more than 25 CDFIs through the New York Forward Loan Fund, the California Rebuilding Fund, the Southern Opportunity and Resilience Fund, and Washington State's Small Business Flex Fund.
The programs overcame some of the greatest challenges that plagued the Paycheck Protection Program in its early days – getting capital to underrepresented small businesses. CDFIs have close ties to businesses in historically underbanked communities and high levels of trust, but are limited by capital constraints, thin margins, and a lack of marketing spend, which made it difficult to respond in a scaled fashion to the pandemic. These programs accelerated lending to unbanked businesses and provided wraparound support to help them with loan applications and documentation. Forty-one percent of businesses reported that their lender spent significant time helping them get their finances in order and complete their application.
Said Bafford, “We were able to scale these programs in a way that can be replicated to drive a more equitable financial system for all participants. The new financing structures and cross-sector alliances born from necessity have now set the bar for what this industry can accomplish.” She pointed to the following highlights from across the programs including:
- $210 million in loans disbursed at an average loan size of $60,000
- 65 percent of the businesses funded are owned by women and People of Color (business owners who self-identify as Black, Hispanic, Native American, Asian, or Multiracial)
- More than 90 percent of the businesses funded have less than $1 million in revenue and fewer than 10 employees, which typically disqualifies them for a bank loan
“Small business lending is key to not only building back from COVID-19, but to creating an inclusive, diverse, and more equitable economy by bridging the financing gap faced by small businesses that leaves behind some of the nation's most talented entrepreneurs,” said Jennifer Pryce, CEO of Calvert Impact Capital. Pryce cites estimates that this gap was $87 billion before the pandemic and will grow as the impacts of the pandemic continue to hurt small businesses.
"The pandemic exacerbated what those of us in the small business lending space already knew: too many are left behind,” said Pryce. “Calvert Impact Capital and our partners were able to move quickly to address the structural gap in the credit market for the smallest businesses…and we’re not stopping now.”
Learn more about the new research by attending a webinar with 60 Decibels, Calvert Impact Capital, Community Reinvestment Fund, USA and other partners on March 31, 2022 at 8am Pacific / 11am Eastern. Register here: Inclusive Support for Small Business: Insights from the New York Forward Loan Fund
Learn more about Calvert Impact Capital's small business lending efforts and portfolio: https://www.calvertimpactcapital.org/smallbusiness