Community Loan Funds Key for Small Businesses
Before the coronavirus pandemic, Arthur Stringfellow’s business—Razor’z Back Barber and Styling Team in Little Rock—was booming. Today, his shop is closed. His rent and home construction loan are due, and neither landlord nor lienholder is offering financial reprieve. Because he employs independent contractors, not salaried staff, he can’t afford the risk of applying for the Payroll Protection Program. Besides, the fund emptied fast. In an effort to save his business and home, he reached out to our team at PEOPLE TRUST Community Loan Fund to secure a $10,000 low-interest loan.
Stringfellow’s experience is a common one in Arkansas. Sixteen percent of our state’s businesses are owned by people of color. Yet, between 2015 and 2019, black and Hispanic-owned businesses received less than two percent of the $1 billion in loan funds awarded. According to a recent survey, the percent of women who sought start-up capital in Arkansas was 10 percent lower than males because many feared being denied for their credit histories. To make matters worse, Congress recently allocated just $10 million—a mere one percent of the $2.2 trillion coronavirus relief bill—to the Minority Business Development Agency, which connects entrepreneurs with the capital, contracts and markets they need to grow.
PEOPLE TRUST is proud to be a part of the network of “financial first responders” helping fill the gaps in COVID-19-related support for the growing number of Asset-Limited, Income-Constrained Employed (ALICE) Arkansans who own and operate their own businesses. Many of whom do not have the time, technology or the savings to ride the coronavirus pandemic out.
Community Development Financial Institutions (CDFIs) like PEOPLE TRUST provide loans and financial services to populations underserved or, more often, rejected by traditional banks. They include community development banks, credit unions, venture capital funds and non-profit loan funds. Currently, there are 19 CDFIs in Arkansas, which award nearly $240 million in loans annually to small businesses.
Weeks before the federal government approved the coronavirus relief package, Arkansas-based CDFIs moved quickly to support businesses with technical assistanceand deferrals on existing loans. Deborah Temple, director of lending for Communities Unlimited, a community development fund based in Fayetteville, reported clients were already experiencing a 40 to 75 percent drop in sales before relief programs were even announced.
Now that Congress passed a second $310 billion PPP fund after the initial $349 billion ran out in 14 days, CDFI leaders are in a unique position to ensure assistance makes its way to the business owners who need it the most. Like Philip Adams, executive director of FORGE Community Loan Fund serving the Ozarks, said, “These are ALICE business owners, and they are ingenious, thrifty, creative and motivated. We have the flexibility to meet them where they are.”
Taking a note from the community fund playbook, the Women’s Foundation of Arkansas launched a Grant Assistance Fund for women-owned small businesses, with plans to distribute $5,000 grants to qualified applicants. When making the announcement, Anna Beth Gorman, its executive director noted, “The disparities that existed for ALICE households before this pandemic will persist with a vengeance if we do not advocate for resources to reach those already struggling, particularly women and minority business owners.”
There’s still much unknown about the full impact the coronavirus will have on small businesses. But Arthur Stringfellow remains hopeful. “As a business owner, you take hits. But no matter what we face, with the right mindset, I know this too shall pass.” In these unprecedented times, one thing is certain: CDFIs offer the flexibility and access ALICE Arkansans need to survive this crisis and ensure an equitable economic recovery.
Arlo Washington is the president of PEOPLE Trust, a community loan fund based in Little Rock and supported by the Winthrop Rockefeller Foundation that provides financial support and literacy for those who would otherwise not receive these opportunities.