In response to what it terms the “unprecedented economic impact” of the COVID-19 virus on small businesses, Wells Fargo Bank is taking action.
In April, CEO Charlie Scharf announced the bank would donate all of its Paycheck Protection Program (PPP) processing fees back to nonprofit lenders serving the small business community.
Details emerged late last week when Wells Fargo announced it will create an Open for Business Fund to help small businesses “keep their doors open, retain employees, and rebuild,” according to a news release, which stated that the bank will donate to the fund about $400 million in gross PPP processing fees.
“This new fund will engage nonprofits serving diverse small businesses in three areas: capital, technical assistance and long-term recovery/resiliency,” the release continued.
Of the $400 million, $250 million will go to community development financial institutions (CDFI) nationwide in grants, money they can lend to struggling small businesses in low-interest loans, said Jenny Flores, head of Wells Fargo Small Business Philanthropy.
“These loans can be new loans, modifications to existing loans, and grants,” Flores said Friday. “We’ve kept it flexible because businesses have diverse needs. We think CDFIs will be in a good position to meet those needs.”
CDFIs are nonprofit lenders certified by the U.S. Department of the Treasury.
“They are a stepping stone to getting a larger bank loan,” Flores said. “[CDFI loans] allow a small business to build up a record: their first stop to figure out ‘Can I get money?’”
There are 21 CDFIs in North Carolina, but the only one with a Wilmington location is Self-Help Credit Union. A list of all CDFIs can be found here
Information about the Open for Business Fund program is available here
Realizing that Black-owned small businesses are among the hardest-hit, $13.5 million of the $250 million will be directed toward them through a collaborative launched in 2016.
“Some Black CDFIs were finding hard to get capital,” Flores said. “They banded together as the Expanding Black Business Credit Initiative (EBBC) and have this plan [to expand] Black business credit.”
The EBBC will use $10 million from Wells Fargo’s $13.5 million to help fund its Black Vision Fund, which aims to help African American communities close the racial wealth gap. The remaining $3.5 million will be divided among the seven Black-focused CDFIs for more immediate assistance to small business owners.
Grants to the CDFIs will be made soon, Flores said. Two other Open for Business Fund initiatives will be launched in the next few months.
One, with an additional $50 million from the fund, is earmarked for technical assistance, Flores said. “We feel this is an important part of help to small businesses and will help them with their business model, their marketing and their technology.”
The money, according to Flores, will go to chambers of commerce and other local agencies like small business development centers so they can provide coaching and mentoring services for small businesses that have been adversely affected by the virus-related economic downturn.
The remaining $100 million will fund a third initiative: a recovery and resilience grant program that will run through 2022 and is designed to help small businesses restore or, if needed, revamp their flow of products and services.
“We’ve noticed that some small businesses have reconfigured the way they do business,” Flores said. “They may want to offer new products or need new vendors. They need to understand changing needs down the road. They need to understand how to leverage their supply chains and find resources. We want to make sure we are providing that support.”
The Open for Business Fund, she added, will support short-term and longer-term changes and will last for three years.