Rep. Maloney Introduces Bill to Help Small Businesses Grow in Developing Communities
NEW YORK--Congresswoman Carolyn B. Maloney (NY-12) gathered at Roberto’s Winds, a thriving small business in Manhattan, with NYC Department of Small Business Services Commissioner Gregg Bishop, local Chambers of Commerce, NYC small businesses, and Community Development Financial Institutions to celebrate Small Business Week and announce her push to prioritize loans for small business growth in developing communities with the reintroduction of her bill, the Investing in America’s Small Businesses Act.
The Investing in America’s Small Businesses Act of 2017, introduced this week, would provide grants to Community Development Financial Institutions (CDFIs) to establish loan-loss reserve funds for small business loans under $50,000, allowing CDFIs to leverage private investments to expand their small business lending programs. These small loans give businesses working capital, help them invest in new equipment or supplies, and have no pre-payment penalties. Rep. Maloney also shared a bipartisan letter she sent to the Appropriations Committee, signed by more than 70 other Members of Congress, requesting $250 million for the CDFI Fund in FY18, a $17 million increase from last year. The additional capital would allow the CDFI Fund to expand lending to small businesses as well as larger businesses that struggle to find the credit they need to thrive in low-income and minority communities.
“Small businesses are an integral and essential part of the fabric of our communities,” said Congresswoman Maloney. “In America, we are known for our small businesses and the opportunities available to aspiring individuals who work hard. However, in underserved and developing communities, all too often these small businesses with low-income and minority owners are unable to access the credit they need in order to grow and thrive. CDFIs serve exactly these communities—with great success and economic benefit. Despite this demonstrated success, CDFIs often lack the capital to meet the needs of many promising small businesses, but my bill would provide a solution. President Trump’s recent budget proposal would cut all grant funding from the CDFI Fund, essentially eliminating the Fund and bringing harm to our nation’s poorest inner-city neighborhoods and most distressed rural communities. This is not the time to cut funding for CDFIs; it’s a time to expand! As small businesses grow, so do the communities they serve. They create stronger workforces and thriving local economies. By passing the Investing in America’s Small Businesses Act and increasing funding for the CDFI Fund, we can help grow small businesses in the neighborhoods in New York City and across the country that need economic development the most.”
The CDFI Fund, a government agency housed within the Department of the Treasury, spurs investments in local and often underserved communities in rural, urban and Native areas by fostering the creation and expansion of CDFIs, private sector financial institutions that specialize in providing affordable credit, creating jobs, and revitalizing neighborhoods. Despite a proven record of success, the CDFI Fund is constantly under attack, most recently from the Trump Administration, whose budget proposal would cut all grant funding from the CDFI Fund. Opponents of the Fund argue that it is unnecessary as the private sector can fill the need by providing credit and financial services to underserved communities. Last year, however, the total funding requests from applications to the CDFI Fund was four times greater than Fund resources. It is clear that private sector investments are not enough to address the significant need for small business credit in underserved communities.
The Investing in America’s Small Businesses Act is strongly supported by the local business and CDFI communities.
“Working with a CDFI like Excelsior Growth Fund made it possible for me to grow Michiko Studios to its fullest potential,” says Roberto Romeo of Roberto’s Winds and Michiko Studios. I had difficulty finding traditional funding for my expansion project, but a CDFI saw the potential and was willing to provide not only the loan, but the advice and support I needed to grow.”
"We applaud Congresswoman Caroline Maloney for introducing the Investing in America’s Small Businesses Act, said Yanki Tshering, Executive Director of the Business Center for New Americans. "CDFIs provide safe and smart loan products and advice that help businesses in low to moderate income communities to grow, become profitable, create jobs, and build safe and financially secure communities."
"Small businesses help support vibrant neighborhoods and keep our local economy strong," said Gregg Bishop, Commissioner of the NYC Department of Small Business Services. "One of the biggest challenges small business owners face is accessing affordable, low interest capital. That is why I am proud to stand with Congresswoman Maloney as she fights to expand an important source of low interest loan funding for small business owners across our city."
“The CDFI program continues to be extremely relevant for the survival of many small businesses,” said Jessica Walker, president and CEO of the Manhattan Chamber of Commerce. “The initial funding it provides often serves as a stabilizing factor that better positions an entrepreneur to secure additional funds from other lenders. The federal government should not cut this vital program.”
“We applaud Congresswoman Maloney’s continued efforts to fight for small business growth in Brooklyn,” said Brooklyn Chamber of Commerce President and CEO Andrew Hoan. “The Congresswoman knows that there is no such thing as being penny wise and pound foolish when it comes to investing in small business, as the returns are that much greater for the economy and tax base. This certainly ‘hits home’ as the Brooklyn Chamber launches Brooklyn Alliance Capital Inc., a CDFI program with a focus on lending for startup and existing business across underserved communities in Brooklyn.”
“We applaud the efforts of Congresswoman Maloney and others in highlighting the critically important work of CDFIs and the need to support the industry,” said Steve Cohen, president of Excelsior Growth Fund. “The CDFI Fund helps mission-driven financial institutions ensure that entrepreneurs nationwide can access fair and affordable financing when they have difficulty securing capital from banks.”
The bill has also received broad support from national organizations in the industry.
“Many living in our hardest hit communities have good business ideas and plans for services their areas need, but are not bankable by traditional financial institutions. CDFIs fill a financial gap in products and services to economically distressed communities and individuals—both rural and urban,” said James R. Klein, CDFI Coalition president and CEO Emeritus of Finance Fund. “CDFIs empower them to become self-sufficient stakeholders in their own future. Congresswoman Maloney’s bill will help CDFIs defray the costs of financing small businesses by establishing loan-loss reserve funds. The Coalition is pleased to see these efforts, which would permit more financing to flow to small businesses located in areas needing investment and jobs.”
The National Federation of Community Development Credit Unions, a national network of credit unions organized by and for underserved communities, has also endorsed the bill. According to Kathleen Mohan, the organization’s President and CEO, “Passing the Investing in America’s Small Business Act is a specific action that Congress can take to bolster America’s economy while supporting underserved communities.”
The Investing in America’s Small Businesses Act introduced on Thursday, March 30.
Roberto’s Winds is a music store in Manhattan that worked with Excelsior Growth Fund (EGF), a New York City based CDFI, to attain a loan to expand his business when he could not get funding from a traditional financial institution. With EGF’s help he was able to build up sound financial projections to graduate from a CDFI loan to a SBA 7(a) loan, a more traditional small business lending source.
· The bill authorizes $25 million to the Community Development Financial Institutions Fund to provide grants to CDFIs for the purpose of establishing loan-loss reserve funds to defray the costs of a small business loan program.
· The bill authorizes $2 million for administrative costs.
· Small business loans backed by a grant from this program may not exceed $50,000.
· CDFIs must provide non-federal matching funds equal to 50% of the grant received.
· Funds may be used to recapture losses for a defaulted loan from a small business loan program after the law has been enacted.
· Funds may not be used to provide direct loans to small businesses.