Community Finance | July 25, 2023

New York backs small-business lending with a follow-on fund for CDFIs

Amy Cortese
ImpactAlpha Editor

Amy Cortese

ImpactAlpha, July 25 – In the depths of the Covid pandemic, New York, California and a coalition of southern states created loan funds to help small, underserved businesses stay afloat with access to low-cost capital.

The “community recovery vehicles,” designed by Calvert Impact Capital and the Community Reinvestment Fund, feature special purpose trusts that buy up loans from community lenders to free up capital for further lending. Small businesses apply for loans and are matched with local lenders via a common intake portal (see, “Innovative CDFIs scale up to help underserved communities move from relief to recovery”).

New York’s Forward Loan Fund channeled $97 million to the state’s small businesses, half of which had never applied for a business loan before. Last week, New York Gov. Kathy Hochul announced a follow-on $150 million fund for small businesses and nonprofits, with a focus on those in low-income, underbanked or rural communities. 

Making the case

The Forward Loan Fund worked with 60 Decibels to interview some of the businesses about “the role the loans played in keeping their businesses open, their employees on payroll, reducing their stress levels, and managing their finances,” said Beth Bafford of Calvert Impact, which manages the fund. “We also heard that many business owners needed more credit to grow.”

Lenders participating in the second fund include Accion Opportunity Fund, Ascendus, NDC’s Community Impact Loan Fund, Pursuit, and TruFund Financial Services. Borrowers will also receive support and technical assistance for the life of the loan.