Like millions of small business owners, Army veteran Heriberto Santiago – the co-founder of a health and wellness business helping the elderly – experienced unprecedented headwinds in 2020. He’s navigated financial challenges, pivoted his business model, and worried as customer volumes declined due to COVID-19.
But thanks to an evolving ecosystem of small business support, his family business is still open. More than ever, banks are working hand-in-hand with nonprofit lenders and community groups to help small businesses of all sizes adapt and evolve to overcome threats to their viability.
As Head of Small Business at Wells Fargo, I believe it’s critical to more effectively meld corporate and nonprofit capabilities to complement efforts by federal, state and local governments. This includes everything from engaging nonprofits that can help small business owners reimagine their business models, to funding nonprofit lenders so they can extend financing to entrepreneurs who often struggle to qualify for conventional credit programs. It means offering deeper technical expertise to small businesses and building multiple ways for them to access both needed financial capital and technical knowledge.
In that spirit, I’m proud to say Wells Fargo is transforming how it supports small businesses and the jobs they provide.
This year, the bank helped approximately 194,000 small businesses receive Paycheck Protection Program (PPP) funding, totaling $10.5 billion, with 84% of the loans going to businesses with fewer than 10 employees, and an average loan size of $54,000. More than 2 in 5 of the loans we originated went to small businesses located in low-to-moderate income or majority-minority census tracts.
In order to amplify the work we did through PPP, this summer Wells Fargo launched an industry-leading Open for Business Fund, committing approximately $400 million for grants to nonprofits focused on supporting small businesses, with an emphasis on organizations that work with diverse small business owners.
The Open for Business Fund (OBF) is a unique approach in that it has three areas of focus: providing capital for loans and payment relief via nonprofit financial institutions, enabling nonprofits to provide technical assistance and training, and capitalizing longer-term resiliency programs designed for small businesses.
As of October, the 14 initial nonprofit grantees awarded funds under the OBF are expecting to sustain an estimated 10,000 small business jobs nationwide, including in the Washington, DC area.
One of the first round grantees is Local Initiatives Support Corporation (LISC), a nonprofit lender known as a Community Development Financial Institution (CDFI) that provides grants and other flexible financial products and services to small business owners.
Heriberto Santiago is one of the thousands of small business owners who has been supported by LISC and its network of partners. He serves as a reminder of the critical role CDFIs are playing in supporting small businesses, as well as the multiplier effect that large financial institutions can have on the scale and scope of CDFIs.
While the OBF is a positive step, it can’t be the only step. More corporations and foundations need to follow suit and invest differently in nonprofits. That way, capital flows to organizations that extend capital to small businesses, as well as to those that provide sorely needed technical assistance, training, and resiliency programs that help small businesses evolve in response to major disruptions.
Heriberto’s story of reinventing his business in the wake of the pandemic reminds me of so many of our customers who are having to rapidly reimagine their business models – and who are counting on the financial services industry to help them stay resilient. This is the time to seize the opportunity to surround small businesses with a stronger ecosystem of support.
By Steve Troutner
Head of Small Business