Small business advocates are asking the court to stop the Trump administration’s unlawful attempt to defund the Community Development Financial Institutions (CDFI) Fund, which connects small business owners in low- and moderate-income communities to affordable capital; without legal action, nearly $300 million in funding will expire on Sept. 30
Aug. 14, 2026—Today, CAMEO Network and Inclusive Action for the City filed a lawsuit asking the court to act quickly to prevent the irreversible expiration of $289 million dollars in congressionally-appropriated funds for the Community Development Financial Institutions (CDFI) Fund. Without legal action, the funds will expire on Sept. 30, robbing small businesses of much-needed investments. Plaintiffs are represented by national legal organization Democracy Forward.
“After many conversations and much deliberation, we had no choice but to stand up for our members and their small business clients,” said Carolina Martinez, CEO of CAMEO Network. “The CDFI Fund is a wonderful example of a public-private partnership that works, leveraging $8 in private sector investment for every $1 in public funding and spurring economic activity. Ultimately if this money doesn’t flow, our communities suffer.”
CDFIs operate in every single state and congressional district, with widespread bipartisan support. In rural and urban communities alike, CDFIs provide capital and coaching to small businesses that are unable to access traditional bank loans – ensuring local businesses can grow, weather downturns, and create jobs. CDFIs also invest in affordable housing and community development projects, like hospitals and childcare centers.
Despite continued bipartisan pressure from Congress, the Trump administration has withheld nearly $300 million in previously appropriated funding from CDFIs since the fiscal year 2025 budget was signed into law on March 14, 2025. Without legal action, this funding will permanently expire on Sept. 30. The filing of this lawsuit is a last resort, following extensive efforts to release the money through bipartisan work with Congress and the U.S. Treasury Department.
“Supporting small businesses shouldn’t be controversial – that’s why generations of bipartisan leaders have invested in CDFI programs that support entrepreneurs and create jobs,” said Doug Smith, Vice President of Policy and Legal Strategy at Inclusive Action for the City. “We’re proud to be taking action to protect the funding that small businesses depend on, and to stand against these reckless attacks that would have devastating impacts on our communities and economy in every corner of the country.”
Funding for CDFIs has been under threat for more than a year. In May 2025, the president’s budget asked Congress to eliminate the CDFI Fund’s discretionary award programs. Congress rejected the proposed cuts and appropriated $324 million for CDFIs for FY 2026, the same appropriations for FY 2025. Congress further barred the use of any appropriated funds to “increase, eliminate, or reduce funding for a program, project, or activity as proposed in the President’s budget request” unless Congress itself enacts that change.
Despite Congress’ unambiguous directives to appropriate and distribute the money to CDFIs, the administration has stalled time and again, ignoring Congress and withholding virtually all of the money for the CDFI Fund budget. The funding is at risk of expiring as the fiscal year 2025 appropriation is set to expire on Sept. 30, 2026, and CDFI Fund award announcements have not been made – eliminating hundreds of millions of dollars of investment into communities nationwide. If FY 2025 funds expire, that doesn’t bode well for FY 2026 funds which sit frozen in OMB accounts where the CDFI Fund cannot reach it.
“Community Development Financial Institutions offer a crucial lifeline to small businesses that all too often get left behind by big banks, and efforts to defund CDFIs are an assault on small business owners in every community in this country. We are honored to work with our clients to defend CDFIs,” said Skye Perryman, President and CEO of Democracy Forward.
The plaintiffs ask that the OMB follow the law and that the CDFI Funds are released for both 2025 and 2026 so the lenders can go about their business and support America’s small businesses and entrepreneurs looking to start and grow their businesses.
Democracy Forward’s legal team involved in this case includes Andrea Matthews, Anna Deffebach, Hanna Hickman, and Steven Bressler.
Read the full complaint here.
Media Contacts:
Blake Case
(601) 832-6079
Erica Liepmann
818-425-1695
About CAMEO Network
CAMEO Network is a network of business service providers made up of 400 organizations, agencies, and individuals dedicated to furthering Micro-Business development with small and micro-business financing such as loans and credit, technical assistance and business management training. Annually, CAMEO members serve about 200,000 very small businesses with training, business and credit assistance and loans. These firms – largely start-ups with less than six employees – support or create 300,000 new jobs and generate a total of $15 billion in economic activity.
About Inclusive Action for the City
Inclusive Action is a nonprofit organization and a community development financial institution (CDFI) based in Los Angeles. Our mission is to champion working people, invest in entrepreneurs, and change systems to build an economy that works for all of us.
About Democracy Forward Foundation
Democracy Forward Foundation is a national legal organization that advances democracy and social progress through litigation, policy, public education, and regulatory engagement. For more information, please visit www.democracyforward.org.