Local Lenders Struggle as Funding Dries Up

In northern Virginia, Karlene Sinclair-Robinson is now focused on closing down the Community Business Partnership, a non-profit she once helped run as finance director. This organization, which has been around for nearly 30 years, is shutting its doors at the end of December. The reason? The Trump administration decided to withhold $324 million in funding that Congress had set aside for community development financial institutions (CDFIs) across the country. These institutions, which include non-profits, credit unions, and small banks, have been accused of promoting a "partisan agenda, " "gender extremism, " and "climate radicalism. " The CDFI Fund, created by Congress in 1994, supports institutions that serve low-income, rural, and minority communities with limited access to traditional banking. These institutions rely on a mix of federal funding, grants, and corporate philanthropy. However, with federal funding paused and the program's future uncertain, CDFIs are struggling to survive. Some are considering mergers or cutting services, while others, like the Community Business Partnership, are forced to close down. The impact of this funding cut is far-reaching. Without CDFIs, small business owners and entrepreneurs may have to turn to credit cards or payday lenders for capital. Nicole Elam, CEO of the National Bankers Association, explains that banks prioritize profitability, while CDFIs are more mission-oriented, focusing on serving underserved communities. Despite the current administration's actions, CDFIs have historically received bipartisan support. Republican Senator Thom Tillis from North Carolina called the move to defund them "amateurish, " stating that CDFIs are present in many red states and districts. Similarly, Republican Senator Mike Rounds from South Dakota emphasized the importance of CDFIs in his rural state. The administration's actions have also led to some CDFIs scrubbing their websites and public-facing materials of any language related to diversity, equity, and inclusion (DEI). Joe Sky-Tucker, CEO of Seattle-area Business Impact NW, mentioned that while the language has changed, their mission to serve their community remains the same. The concern among CDFI leaders is not just the loss of federal funding but the potential unraveling of the entire support system that spans government, philanthropy, and private funds. Nate Schaffran, executive director of the California Coalition for Community Investment, highlights this worry. In Richmond, Kristen Gardner Beal, 35, would not have been able to open her boutique wine and restaurant business without the help of Bridging Virginia, a local CDFI. However, in light of the administration's actions, Bridging Virginia is now tightening its belt, sharing staff and rent with another local nonprofit, and considering a merger. Gardner Beal and her business partner, who are both Black, received a $100, 000 loan to start Penny's Wine Shop in 2021. They had initially tried to secure a $150, 000 loan from a large bank but were denied in the end.