- California needs to get its fair share of CDFI funding, especially now that the forthcoming Small Business Lending Act will designate $300 million for CDFIs. (Thanks Roberto!)
- Technical Assistance is a key “risk mitigator” and needs to be fully funded (Thanks Selma!)
- SBA guarantees need to be extended to non-bank CDFIs who need this risk mitigation to raise more capital to meet the huge demand from small businesses in their communities –many of whom are, in fact, credit-worthy. (Thanks Kurt!)
Many of our recommendations were included in the Capstone Forum Addendum which has been distributed to the Joint Financial Services Committee and to all the Federal Reserve banks and their constituents across the country that participated in task forces leading up to the Forum. See this link for the full set of recommendations and note especially pages 12-14.
Addressing the Financing Needs of Small Businesses Addendum:
Although the demand for start up capital and Technical Assistance by the Unemployed trying to create their own jobs was cited several times, I don’t believe that the connection has been made between Workforce Investment and deployment of capital. This is an area where our Micro Enterprise sectors, and CAMEO members, in particular, need to be heard.
Of course the schmoozing was good and rumor has it that a major bank will soon announce a fund for loan loss reserves to enable more nonprofits to become SBA Micro Lenders!
20100 Appropriations Bill: As a result of our May Policy Briefing at the DC Capitol, Barbara Lee (D-Oakland) submitted two Approps requests: to create a Self Employment program with WIA funds set aside for demonstration projects ($9 million); to expand SBA guarantees for non-depository CDFIs. The first recommendation is dead because DOL does not want to change any performance measures without WIA Reauthorization (see above paragraph). But there is an appetite for expanding SBA guarantees. The SBA and Treasury are currently discussing how to do this. For example, how much oversight would non-bank CDFIs be willing to embrace? CAMEO was asked to get feedback from members on this issue – CDFIs please weigh in!
Small Business Lending Act of 2010 (HR5297): Title I establishes a Small Business Lending fund of $30B to be deployed by Community Banks (remember, the ones with plenty of liquidity but no customers!) the good news is that $300m will be allocated to the CDFI Fund for small/micro business lending.
Title II, the State Small Business Credit Initiative would re-fund our State Loan Guarantee Program Trust Funds. CA would be allocated 10.2% or $204 M by the House; however the Senate has reduced the amount so CA might only get $900,000. CAMEO is working to raise the allocation back to the House version.
In conclusion, my lasting impression is that more capital will flow to nonprofit community lenders and that more funding for loan guarantees and new policies to expand SBA guarantees to non-bank CDFIs are underway. However, there is a huge lack of awareness of the role Technical Assistance plays in strengthening businesses so they are loan ready and stabilizing businesses after they have a loan. We need to emphasize the broad range of TA as the essential tools for “mitigating credit risk”.
CAMEO- and you are members – will be actively advocating for passage of this legislation. Stay tuned!
On a related matter – there will soon be hearings on CRA around the US and on Aug. 17 in LA. I encourage all our members to send in written testimony, using this link – http://www.ffiec.gov/CRA/hearings.htm – as follows:
- Regulators need to give equal value to the provision of grants for TA as they do for investments in small/micro business lending.
- Regulators need to increase the value given to below market rate investments made by banks to nonprofit lenders, in order to encourage the deployment of EQ2 and similar investment products.
Hold these thoughts!