Bill Would Establish Dedicated Office of Community Financial Institution at Small Business Administration
WASHINGTON – U.S. Senator John Hickenlooper led a bipartisan group of Senate colleagues in introducing the Supporting Community Lenders Act, a bill to expand credit access to underserved small business owners. The bill would work to dismantle barriers to capital by bolstering the federal resources available to community financial institutions – organizations that overwhelmingly lend to underserved small business owners.
“When we opened the Wynkoop, banks turned us away right and left until a community-based lender finally took a chance on us,” said Hickenlooper. “Small businesses are the engine of our economy. We need to make it an even playing field.”
“Obtaining the credit needed to launch or expand a small business is always hard, and made harder today with inflationary pressures on lending institutions. We know community financial institutions strive to provide access to capital to entrepreneurs, first-time homebuyers, and individuals with everyday credit needs in our communities,” said Hyde-Smith. “By establishing a dedicated Office of Community Financial Institutions within SBA, we can rest assured these institutions will have the resources they need to carry out this critical work.”
“CDFIs and MDIs can play a crucial role in driving economic growth and providing access to capital to underserved communities,” said Warner. “I’m glad to support this bipartisan bill to give them additional tools to help them cut through bureaucratic red tape and make sure that these institutions and the people they serve have access to the resources they deserve.”
Current institutional barriers prevent around 83% of entrepreneurs from accessing bank loans or venture capital. Instead, these small business owners rely on savings or personal credit cards to make ends meet. In 2019, more than a quarter of startups named lack of credit as their top business challenge. These barriers to credit disproportionately impact entrepreneurs in rural areas, veterans, women, and minorities.
Community Financial Institutions, including Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), Certified Development Companies (CDCs), and Microloan Intermediaries, exist to support underserved small businesses and close this credit gap. However, these organizations currently lack a designated advocate at the federal level to help them navigate federal bureaucracy and take advantage of available programs.
The senators’ bill would create an institutional support system for community financial institutions. Specifically, the Supporting Community Lenders Act would:
- Create an Office of Community Financial Institutions at the SBA
- Define community financial institutions as federally registered CDFIs, MDIs, CDCs, and Microloan Intermediaries;
- Create and implement programs that support the growth and development of these institutions;
- Establish partnerships with relevant parties within the SBA and across federal agencies and advocate on these institutions’ behalf;
- Host public meetings with stakeholders at least twice a year;
- Produce comprehensive reports to Congress every three years.
Representative McGarvey will sponsor the House version of the bill.
“Mission-focused banks, especially certified Community Development Financial Institutions (CDFIs), are key to improving access to capital for low- and moderate-income (LMI) communities in Colorado and across the United States. The Supporting Community Lenders Act is a great opportunity to advance this work. By establishing an SBA Office of Community Financial Institutions, the Act will prioritize CDFI banks’ missions at SBA, and elevate the needs of underserved communities within the Federal Government,” said Kent Curtis, President of First Southwest Bank, a Colorado CDFI.
“The Supporting Community Lenders Act is a great opportunity to integrate mission-focused CDFI and MDI banks into SBA’s outreach and servicing of small businesses in underserved, low income and minority communities. The capital gap for these businesses is acute. The members of the Community Development Bankers Association thank Senators Hickenlooper, Hyde-Smith, Braun, and Warner for introducing this important legislation,” said Brian Blake from the Community Development Bankers Association.
One pager on the bill is available HERE.
Full bill text is available HERE.