Small businesses are Little Engines That Do. They think they can, they know they can—and they're right. Small businesses are responsible for more than half of all U.S. employment.
That's why community development financial institutions (CDFIs) are focused more than ever on meeting the financing needs of small businesses. The CDFIs in the Opportunity Finance Network have invested $1.5 billion in a total of almost 60,000 small businesses since 2008, including many businesses that saw their sources of financing dry up, helping move the economy along the road to recovery.
Our Create Jobs for USA partnership with Starbucks in 2011 and 2012 raised more than $15 million from hundreds of thousands of individuals and institutions that CDFIs leveraged into small business financing to create or retain more than 5,000 jobs. Our work with the Small Business Administration has created a new program, the Community Advantage Program, that gives CDFIs access to the SBA's critical 7(a) program to spur small business credit. Without CDFIs, small business would struggle for financing while bigger business see credit flow more smoothly.
Yet there's plenty more work to do. Despite significant gains since 2009, unemployment levels remain unacceptable. Unemployment in November was 7 percent nationally, and more than 11 million Americans who want to work still cannot find a job. And those statistics tell only part of the story. An additional eight million Americans are underemployed, stuck in part-time jobs even though they'd prefer full-time employment, according to Bureau of Labor Statistics data from November. That means that what some economists call the "real unemployment rate" is closer to 14 percent.
We need more jobs and so we must support small businesses. That's where CDFIs play an invaluable role. OFN's quarterly "Market Conditions Report," based on CDFI market data, reported that applications for CDFI small business financing during the fourth quarter of 2012 increased by 64 percent over the same time period in 2011, and 66 percent of CDFI respondents saw that trend continuing. There is an undeniable need nationally for what we in the CDFI world call "opportunity finance."
CDFIs are agile enough to step into those credit gaps whenever and wherever they occur. Our record is strong and our impact is considerable. In fiscal year 2012, Members of our network provided $2.7 billion in financing to people, markets, and communities just beyond the margins of conventional, mainstream lending. CDFIs respond to economic distress in places like Baltimore, the Mississippi Delta, and Native American reservations―and we serve low-income and low-wealth communities in all 50 states.
I was proud to be in Michigan recently as a Member of the Goldman Sachs 10,000 Small Businesses Advisory Council―alongside Warren Buffett, Marc Morial of the National Urban League, Michael Porter of Harvard Business School, and Lloyd Blankfein of Goldman Sachs — when two OFN Member CDFIs were named the Detroit-area lenders for the $500 million Goldman Sachs 10,000 Small Businesses initiative. Those two CDFIs―Invest Detroit Foundation and Detroit Development Fund — will finance small businesses with investments from Goldman Sachs. Both have a strong track record of local impact. One of Invest Detroit's recent notable success stories (in partnership with yet another CDFI) is The Auburn, a mixed-use business development that is helping revitalize a Midtown neighborhood by offering small businesses new retail space. And Detroit Development Fund over the years has committed more than $21.5 million to local businesses and real estate projects that have created or retained more than 1,500 jobs. The Goldman Sachs program is helping small businesses create jobs and economic growth by providing entrepreneurs with education, support services, capacity building, and capital at more than 17 sites across the U.S.
OFN's work, the work of CDFIs, and our partnerships will not change the world overnight. But CDFIs help demonstrate that the seemingly impossible is possible, changing hearts and minds about investing in distressed markets. Over more than 30 years and more than $50 billion in financing, we have created a flywheel effect that is generating good financial, economic, and social results.
Through CDFI lending and through CDFI partnerships, small businesses grow, jobs are created, our economy becomes healthier and our nation moves closer to its goal of opportunity for all. Like their small business borrowers, CDFIs are little engines that do.
This article originally appeared in the Huffington Post publication. Content was produced by outside parties not affiliated with Bank of America. Opinions or ideas expressed are not necessarily those of Bank of America, Merrill Lynch Wealth Management, U.S. Trust or Bank of America Merrill Lynch, nor do they reflect their views or endorsement. These materials are for informational purposes only. Bank of America, Merrill Lynch Wealth Management, U.S. Trust and Bank of America Merrill Lynch do not assume liability for any loss or damage resulting from anyone's reliance on the information provided.