Support from federal and state-funded programs has existed for decades, particularly for small businesses. These credit enhancements and grants became more visible to the public during the COVID-19 pandemic, when opportunities like the Paycheck Protection Program (PPP), state relief grants, and the State Small Business Credit Initiative (SSBCI) opened to help business owners survive and stabilize.
The Community Reinvestment Act (CRA) and Small Business Administration (SBA) both recently modernized their programs. And programs under the $27 billion Greenhouse Gas Reduction Fund (GGRF) will soon enter the market to help small businesses join the clean energy industry and reduce their carbon footprints.
Challenge: Reach Small Businesses Few Have Reached Before
These days, government agencies are holding capital deployers accountable for making sure these funding opportunities support communities that have historically missed out on them.
To benefit from the billions of dollars coming down through these programs and make an impact in these communities, financial institutions face decades-old challenges:
- Lack of local relationships usually gained through brick-and-mortar branches and marketing campaigns
- Heavy document requirements that are difficult for applicants to complete without 1:1 help
- Language barriers for multilingual business owners
- Lack of trust in government and financial institutions within underserved communities
Multifaceted Solutions for a Multifaceted Market
Through its participation in the PPP program, as an administrator of state-funded grant and loan programs in some of the largest states, and as the top Black-led SBA 7(a) lender in the country, Lendistry has gained a reputation for successfully financing undercapitalized businesses.
- Technology designed for accessibility and accountability
For the applicant, an online loan application removes the need to visit a branch during business hours. But more than creating a way to enter information and upload documents from home, fintech can also be used to pull information from existing sources like bank statements and tax returns, removing some pieces of cumbersome, time-consuming paperwork. Additionally, technology can provide real-time data to track the program’s impact in target demographics.
- Partnerships cultivated for community trust and access
Local CDFIs, Small Business Development Centers, chambers of commerce, and other mission-focused organizations are already embedded in underserved communities, have earned their trust, and understand their needs. When empowered and trained to use white-labeled versions of the tech described above, these partners are powerful pathways between small business owners in distressed communities and the capital deployers looking to offer them access to financing.
- Lending products built for flexibility and responsiveness
Today’s small business owners, especially those who can’t yet qualify for larger loans, want loans in smaller amounts with terms that preserve more of their cash flow. If a lender can’t offer this to their customers directly, partnering with a lender who can is a mutually beneficial way to meet the customer’s expectations and preserve the relationship.
As more government programs are developed to support underserved business borrowers, financial institutions need to be ready to show that they can deploy those funds to those communities effectively, either directly or via trusted, responsible partnerships.