EDA Supports Fair Credit Leaders

While accessibility to credit is critical to the success and growth of small businesses, research shows that lending to borrowers from marginalized communities continues to lag.¹ In 2020, the CARES Act catalyzed a major expansion of the successful Economic Development Administration (EDA) Revolving Loan Fund (RLF) program. RFLs provide small businesses with access to capital in the form of seed funding to grow and generate new employment opportunities with competitive wages and benefits. Prior to the onset of the pandemic, EDA’s RLF portfolio had a combined capital base of nearly $900 million; Recovery assistance from the CARES Act has grown the portfolio to over $1.5 billion.

To help EDA-funded RFLs implement fair lending practices to reach borrowers in marginalized and underserved communities, the Institute for Local Self-Reliance and Recast City have collaborated to develop a series of workshops, Fair Lending Leaders. Supported by a $790,020 grant from EDA’s National Research and Technical Assistance (RNTA) program, the first 12-session online program launched in late 2021 with a cohort of 40 decision makers drawn from RFL operators from the EDA.

Debra Davis, a business development loan officer with the Economic Development Corporation of Kansas City (EDCKC), was one of those who participated. According to Davis, she joined EDCKC in 2019 with a mandate to help make the company’s existing RLF more diverse in its lending practices. However, during the pandemic, much of his awareness of underserved businesses in Kansas City’s business community has been significantly reduced.

“I received a letter from our EDA economic development representative telling me about the program,” Davis recalls. “The program gave us the opportunity to learn new ways to achieve our goal of integrating better equity practices into our loan fund.”

Briselda Hernandez of the Souris Basin Planning Council credits the Equitable Lending Leaders program with helping SBPC identify ways to change its lending practices to achieve more equitable outcomes.

For six months, cohort members met for one hour every two weeks. During the workshop sessions, they learned how to improve the borrower experience, best underwriting practices for reaching diverse business owners, and strategic marketing ideas for organizations with limited resources.

Another member of the ELL cohort, Briselda Hernandez, is executive director of Minot, the Mouse Basin Planning Board (SBPC) of North Dakota, an EDA-designated economic development district and RFL operator.

“We decided to apply because our organization has gone through quite a bit of change in terms of focus and how we try to accomplish our mission,” explained Hernandez, another member of the Equitable Lending Leaders cohort. “One of those changes is an intentional effort for greater inclusion.”

Davis and Hernandez echoed a consensus of feedback received from other course participants who praised the Equitable Lending Leaders program and its quality of instruction.

“We felt that really complemented what we’re trying to achieve,” said Hernandez, who then identified how key learnings from the series are helping SBPC change its own lending practices to achieve more equitable outcomes. “Do we need too many approvals? Does it take too long? We want to identify the obstacles we create.

Building on the success of the first cohort of Equitable Lending Leaders, ILSR and Recast City plan to expand their reach. Two additional cohorts, each recruiting approximately 40 RLF operators, are expected to occur over the next year. With evolving public health conditions, future sessions may include in-person and hybrid options.

EDA’s National Research and Technical Assistance Program funds research, evaluation, and technical assistance projects that promote competitiveness and innovation in struggling rural and urban areas across the United States and its territories. Discover other RNTA projects on eda.gov.

Tags: Small business development/RFL