Everybody’s Business

August 1, 2017

5 Key Learnings to Boost Your Effectiveness in Serving Small Businesses

As a precursor to this year's Opportunity Finance Network's Small Business Finance Forum in Chicago, Community Reinvestment Fund, USA (CRF) and Next Street brought together leaders in the Community Development Financial Institution (CDFI) industry to learn from each other. The topic du jour - Understanding, Assessing, and Acting within a Market to Effectively Serve Small Businesses - for this June's event attracted a cross-section of 25+ organizations, mainly CDFIs, serving all 50 states, to advance our collective thinking around the topic.

The impetus for this event came through support from JPMorgan Chase & Co. as part of its Partnerships for Raising Opportunity in Neighborhoods (PRO Neighborhoods) initiative. The $125 million, five-year initiative works to address neighborhood quality issues that are among the biggest drivers of income and wealth inequality. Through an annual competition, PRO Neighborhoods invites CDFIs to work together collaboratively to address a specific community development challenge with innovative solutions. PRO Neighborhoods also supports peer learning events, capacity building and knowledge sharing opportunities to enhance the impact of the winners and the broader CDFI field.

CRF, a CDFI with a mission to empower people to improve their lives and strengthen their communities through innovative financial solutions, received a PRO Neighborhoods grant in 2014 to support the Emerging Small and Medium Enterprise Initiative. This program was a collaboration including CRF, Coastal Enterprises, Inc. (CEI), the National Development Council (NDC), and Calvert Social Investment Foundation. In the spirit of the PRO Neighborhoods initiative, this cohort of CDFIs partnered to leverage each other's strengths - including deeply rooted business lending expertise in local markets, innovative applications of technology, and unique knowledge of and access to capital markets - ultimately enabling the group to deploy just under $150 million in small business loans, nearly double the original target amount over the three year course of the program.

Since participating in the inaugural class of PRO Neighborhoods grantees, CRF has continued to explore collaboration opportunities with a variety of community development partners. Most recently, CRF and Next Street have worked together to develop a deeper, more data-driven and analytical understanding of how to approach key target markets. With a core expertise around market assessment, Next Street - a boutique consulting firm founded in 2005 with the goal of transforming the way finance and business advice are provided in underserved markets - was an obvious partner to co-facilitate the peer learning event.

Together, CRF and Next Street guided participants in an engaging discussion on the current state of small businesses, how to analyze a market before you can serve the small businesses within the market, and what you can use to measure the effectiveness of your actions. We then concluded our discussion with a series of breakouts and questions, which all culminated in a realization that we still have more work to do together.

That said, here are 5 key takeaways that might be helpful to you, and the small business communities you serve, right now:

1. Any small business ecosystem effort should have some focus, at least in part, on supporting minority-owned, women-owned, and/or immigrant-owned businesses. Small businesses - particularly those that are underserved - need access to capital, revenue, and knowledge. While it is no surprise that businesses need these three things, participants were drawn to data that demonstrated how women and ethnic minority groups have disproportionately lacked access to capital, debt, and equity products. Specifically, minority-owned firms experience a loan denial rate of two to three times those of non-minority-owned firms. Furthermore, women are twice less likely to have access to traditional commercial banking products. Supporting historically underserved business owner populations is clearly a focus that we, as CDFIs, live and breathe each day, but it also calls upon us to be even more rigorous in our understanding and analysis of the markets we serve. Conventional lenders and traditional sources of capital tend not to focus on the unique needs of the customer groups that we serve, which partially contributes to the lack of available readily data and analysis. It's incumbent upon us not only to focus on these markets from a mission perspective, but also to be committed to a data-driven analytical approach of how best to meet unmet needs.

2. Organizations have trouble defining, identifying, and targeting their target customer. Participants have an earnest desire to understand their ideal customer. The most common questions posed to us were:

a. Who truly is our customer, and how do we find data on specific target populations that potentially make up our customer base?
b. Does it take "boots on the ground" to understand a businesses' true needs?
c. Do we, as a nonprofit CDFI, have the products/capacity to effectively meet the needs of those businesses, and who can we partner with in new geographies to accelerate our ability understand and serve new potential customers?

Most of Next Street's and CRF's experiences (validated by the head nods of attendees in the room) have included concentrated efforts to properly answer these questions. We continue to recognize significant gaps in our understanding of exactly who our target customer is, what their unique needs are, and where we ought to focus and specialize in order to fill these gaps. While these concentrated efforts often require experts (e.g. external consultants, in-house practitioners, etc.) who can help answer these questions, some organizations have successfully boot-strapped by working with graduate-level interns or pro bono consultants as a cost-effective alternative. Either way, time and resources are needed to properly understand the target customer and set these organizational efforts up for success.

3. A simple 3-step process can get you started. Participants latched onto our process - (1) understand the market ecosystem, (2) identify the gaps, and (3) develop a plan - to help them understand and exert influence on a small business ecosystem within a particular geographic area. Drawing from examples of this 3-step approach through Next Street's efforts in Boston and CRF's efforts in Baltimore, we shared the importance of (and challenges involved in) quantitative and qualitative information gathering.

Participants were particularly drawn to two specific tools that have resulted from sample plans to serve small businesses in a particular place. CRF's technological solution, known as Connect2Capital, effectively utilizes technology to assess and address the capital needs of small businesses. Connect2Capital provides a distributed web application that can source information about small business financing needs across multiple geographies and customer segments, aggregate and standardize that information, and automatically route loan inquiries to CDFI business lenders with products that match the identified need. A second approach is rooted in Next Street's experience operating small business solution centers in New York City. Through these brick-and-mortar facilities, Next Street works with entrepreneurs and small business owners to secure financing, recruit and train company talent, obtain M/WBE certification, and navigate the greater ecosystem at large. Utilizing technology effectively or concentrating efforts in a single small business center each meet the needs of small businesses in their own way, but one must know how these efforts play into the broader small business ecosystem in order to fully unlock their potential.

4. Evaluating the impact of our efforts helps us be more effective. We admitted to ourselves that the data collected to measure our effectiveness in serving small businesses is sometimes of little use. We also proposed, however, that our common goal should be to develop a system that reports on data from loan/financing applications, how technical assistance impacts company growth, and any follow-on financing activity - thereby, evaluating our impact from start to finish. In order to have a holistic measurement system, we must also candidly answer the following - "is our data collection based on our funders' needs or our own?" Since most participants acknowledged that funders often dictate data collection, we see it as our collective responsibility to understand why we are collecting data, and in turn, how it will be used. In either case, we need to ensure that the data we are collecting helps us inform our strategy and business decisions, and ultimately helps us be more successful in meeting our clients' needs.

5. Continued collaboration is key. From our collective experiences, small businesses benefit when organizations collaborate to improve the entire ecosystem. As obvious as collaboration might seem, it is often difficult to execute in a way that delivers value to all participants. When done effectively, the upside is significant. Particularly when thinking about market assessment, collaboration can yield valuable insights for CDFIs that might be operating with a competitive lens, instead allowing for lenders in a single market to differentiate their offerings, focus on what they each do best, and present a more coherent landscape for the small business customer. To this end, successful collaboration can take many forms, including regular convenings with partners (e.g. CDFIs, business service organizations, business owners, etc.) or partnership networks to build deeper community connections, or through a shared technology platform. Regardless of the way in which collaboration happens, we agreed that the underpinning of any collaborative effort requires an openness and willingness to build an ecosystem based on the success of the collective, rather than the individual.

Overall, we encourage you to absorb these 5 takeaways to potentially help you in effectively participating in your own small business ecosystems. If you want more detail on the materials that we used during our discussion (and the data sources cited in this post), feel free to download a copy of the presentation below.  We welcome your comments and feedback to continue to advance our shared agenda even more.

 Download the Assessment Presentation Here:

Posted by: CRFUSA

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December 15, 2016

Help CRF Small Business Borrowers Win Up to $10,000

Vote for your favorite CRF borrower in the Calvert Foundation Small Business Competition

Minneapolis, MN - (December 15, 2016) Six Community Reinvestment Fund, USA (CRF) borrowers - RoadSkulls, GrandChamps, Way Station, Eastlake Brewery, CW Consulting and Lucky Strike Lanes - are competing to win up to $10,000 in the Calvert Small Business Competition.  The contest was open to small businesses that received financing from mission-driven lenders in whom Calvert Foundation invests, including CRF. Second place will receive $3,000 and third place will receive $2,000.

Borrowers created a short profile on the competition's website that describes their small business and the value it brings to the community. During the voting period, until December 23, the entrepreneurs are encouraged to engage their networks while also promoting the value that small businesses contribute to their local community. The three small businesses with the greatest number of votes will win the cash prizes!

About Community Reinvestment Fund (CRF)
Founded in 1988, Community Reinvestment Fund, USA (CRF) is a national non-profit organization with a mission to empower people to improve their lives and strengthen their communities through innovative financial solutions. A leading Community Development Institution (CDFI), CRF develops products and services aimed at increasing the flow of capital to historically underinvested communities across the country. CRF has injected more than $2 billion across the country to help stimulate job creation and economic development, provide affordable housing, and support community facilities.  For more information, visit www.crfusa.com.

About Calvert Foundation
Calvert Foundation empowers investors to empower communities. We make it possible for individuals and institutions to invest in helping low-income communities become healthy and prosperous. Through the Community Investment Note, our investors have created thousands of jobs, classroom seats, affordable homes, and critical services in the U.S. and around the world. For more information, visit www.calvertfoundation.org.

press release

Posted by: CRFUSA

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October 26, 2016

Community Reinvestment Fund, USA Wins Small Business Leader Award from Goldman Sachs 10,000 Small Businesses, the Surdna Foundation, and Opportunity Finance Network

Recognized for transformative financing strategies in disinvested communities

FOR IMMEDIATE RELEASE

ATLANTA (October 26, 2016) - Goldman Sachs 10,000 Small Businesses, the Surdna Foundation and Opportunity Finance Network (OFN) today announced that Community Reinvestment Fund, USA (CRF) is a recipient of the Small Business Leader Award (SBLA) for their transformative and innovative growth strategies. CRF is one of four Community Development Financial Institutions (CDFIs) receiving this national award. These lenders play a critical role in financing small businesses in low-income, low-wealth, or historically disinvested communities that lack access to traditional capital.

CRF is recognized for creating an innovative industry-wide technology solution to better serve disinvested communities. CRF's leadership in modeling a high-level of collaboration will incent other CDFIs to use these tools to create their own efficiencies.

"We are honored to be acknowledged for our efforts to build the capacity and capabilities of our CDFI colleagues as we work together to address the challenges and needs of the small businesses we serve," said Frank Altman, President and CEO of CRF. "CDFIs will continue to provide responsible, innovative financial solutions to people and communities across the country, and we are proud to be part of this industry."

The SBLA, now in its third year, recognizes and rewards excellence from the highly selective Small Business Finance Collaborative, a group of small business lenders who have worked together over the past two years to develop and implement ambitious growth plans for small business lending. The recipients were announced during OFN's annual Conference in Atlanta.

"Helping small businesses thrive is an important objective of our 10,000 Small Businesses program, and we are proud to recognize lenders that share in that mission," said Esta E. Stecher, Chair of the Board of Directors of Goldman Sachs Bank USA. "Each of this year's winning CDFIs is going above and beyond to provide capital to small businesses that may have difficulty accessing funding to spur growth and create jobs."

"This year's recipients have created important models to lead the CDFI industry to reach more underserved small business borrowers," said Shawn Escoffery, Program Director, Strong Local Economies at Surdna Foundation. "Their innovative strategies lay the groundwork for job growth and economic opportunity in communities of color and other historically disinvested communities."

"We are honored to recognize these four lenders for their dedication to evolving their business models to meet new market challenges and the needs of their communities. They were part of a cohort of 24 mission-driven lenders in the

Small Business Finance Collaborative who grew and learned from each other, and they have continued to create opportunity and momentum in the small business space," said Francis A. Lutz, interim CEO at OFN. "They are proving that providing responsible capital can be a successful business model for all lenders."

To learn more about the Small Business Leader Award for Mission-Driven Lenders, visit http://ofn.org/small-business-leader-award.

About Community Reinvestment Fund, USA
Community Reinvestment Fund, USA (CRF), a nonprofit organization and certified CDFI, provides innovative financial solutions that empower low-wealth people to improve their lives and strengthen their communities. CRF offers a diversified set of innovative products and services, designed to fill gaps in access to capital and build the capacity and capabilities of others.Since 1988, CRF has injected more than $2 billion into low-income and economically disadvantaged communities around the country to help stimulate job creation and economic development, provide affordable housing, and support community facilities.  For more information, visit www.crfusa.com.

About Goldman Sachs 10,000 Small Businesses
Goldman Sachs 10,000 Small Businesses is a $500 million investment to help small businesses in the United States create jobs and economic growth by providing entrepreneurs with a practical business education, access to capital and business support services. The program is based on the broadly held view of leading experts that greater access to this combination of education, capital, and support services best addresses barriers to growth. For more information, visit www.gs.com/10000smallbusinesses.

About the Surdna Foundation
The Surdna Foundation seeks to foster sustainable communities in the United States -- communities guided by principles of social justice and distinguished by healthy environments, strong local economies, and thriving cultures. For over five generations, the Foundation has been governed largely by descendants of John Andrus and has developed a tradition of innovative service for those in need of help or opportunity. For more information, visit www.surdna.org.

About OFN
Opportunity Finance Network (OFN), the leading national network of private financial institutions, creates growth that is good for communities, investors, individuals, and the economy. Members of OFN are community development financial institutions (CDFIs) that deliver responsible lending to help low-wealth and low-income communities join the economic mainstream. Through 2015 OFN's network originated $48 billion in financing in urban, rural, and Native American communities. This financing has helped to create or maintain more than 1,044,000 jobs, start or expand nearly 191,000 businesses and microenterprises, and support the development or rehabilitation of nearly 1.5 million housing units and 9,800 community facility projects. For more information, visit ofn.org.

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Media Contact:
Joan Barnes
Community Reinvestment Fund, USA
612-305-2050
Joan@crfusa.com

Full press release

Posted by: CRFUSA

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