The Alliance Endorsement of the Community Advantage Loan Program Act of 2023

July 18, 2023

The Honorable Ben Cardin

Chairman, United States Senate Committee on Appropriations

428A Russell Senate Office Building

Washington, DC 20510

Dear Senator Cardin:

On behalf of the African American Alliance of CDFI CEOs (the Alliance), I am writing to express our sincere gratitude to you for thoughtfully developing this legislation with the reforms we have contemplated for years regarding Community Advantage. The bill makes the Community Advantage program permanent, protects the reforms Alliance members worked on diligently with the Small Business Administration (SBA), and adds increased guaranty support for SBA 7(a) loans. Therefore, the Alliance extends our endorsement of your proposed legislation, the Community Advantage Loan Program Act of 2023. Your bill could codify the SBA’s effective Community Advantage pilot, which provides more protection to ensure this great work continues. While the Alliance believes that it would have been beneficial to extend the capacity to grant loans of up to $750,000 to more than just eight approved institutions, we acknowledge and value the overall effect of the legislation.It instills confidence not only in our community-focused financial institutions, who are motivated by their mission to serve, but also in the small businesses we aid, demonstrating the SBA’s unwavering commitment to increase lending to underprivileged and typically neglected sectors.

The Alliance is a national membership-based organization with a mission to empower Black communities by promoting economic stability, well-being, and wealth. Leveraging a network of 77 Black-led Community Development Financial Institutions (CDFIs), the Alliance is working towards establishing power and promoting equal economic opportunity for Black individuals, families, and communities across all 50 states.

Promoting financial inclusion and ensuring equitable access to capital are pivotal in stimulating economic growth and expansion. Regrettably, entrepreneurs of color often encounter more frequent and pronounced hurdles in gaining access to capital compared to other demographic groups. The issue is complex and deeply rooted in various systemic, socio-economic, and historical contexts. The Community Advantage Loan Program provides a crucial counterbalance to these issues. By facilitating the provision of vital capital to businesses that may be hindered by traditional lending barriers, the program encourages the growth and development of businesses within communities of color, fostering economic equity and opportunity in small-dollar lending. By codifying the Community Advantage Loan Program into law, we believe that we can build on its successes and more effectively bridge the gap between these disadvantaged businesses and the capital they require to flourish.

The Alliance appreciates Senator Cardin’s continued dedication to the Community Advantage Loan Program and its associated lenders. Your efforts contribute to targeted and efficient lending practices, grounded in the notion that all businesses, regardless of their background or circumstances, should be afforded equal access to an inclusive and fair lending ecosystem. We urge Congress to enact this crucial piece of legislation that will strengthen our unified efforts to create a balanced lending landscape, thus enabling the growth of more businesses and stimulating economic development in traditionally underserved communities.

Breaching the Debt Limit: The Ripple Effects on Black Americans and Low-Income Communities

Central to the American economy is a complex matrix of fiscal strategies and financial rulings. A crucial element within this framework is the debt limit – a statutory control on the quantity of national debt the Treasury Department can accumulate. Breaching this debt limit, a situation where the nation fails to repay its debt, carries significant implications for all social layers. Yet, it particularly influences Black Americans and financially underprivileged communities, as any interruptions in the deployment of federal assistance programs – such as Medicaid, Pell grants, and SNAP – could shrink the crucial safety nets for these communities. The potential effects of such a breach are multifaceted, affecting racial wealth disparity, home ownership rates, and capital accessibility, underscoring the need for careful and considerate policymaking. 

The Impacts on Racial Wealth Disparity 

To start, it is vital to focus on the possible effects of a debt limit breach on racial wealth disparity. This wealth disparity is a difference in median wealth among diverse racial groups, with a notable contrast between Black and White households in the United States. A debt limit breach could trigger a widespread economic contraction, marked by increased unemployment, reduced wages, and depreciating asset values. In such conditions, Black Americans, already contending with an existing wealth gap, may face disproportionate consequences. This economic recession could exacerbate the wealth disparity as minority families often bear the brunt of job losses and salary reductions, and their wealth tends to be tied more to employment income than to more stable assets such as stocks and real estate. 

The Racial Divide in Home Ownership 

Next is the racial home ownership disparity. Home ownership is a major pathway to wealth accumulation in America. However, a distinct racial divide exists in home ownership rates, with Black Americans traditionally less likely to own homes compared to their white counterparts. A debt limit breach might induce a rise in interest rates and tighter credit conditions, making mortgages less accessible, especially for those from low-income households. As a result, the racial home ownership disparity could grow, as Black Americans and financially disadvantaged communities find home ownership increasingly elusive. 

Capital Accessibility 

The importance of capital accessibility in this narrative is immense. Capital accessibility allows individuals and businesses to invest, expand, and ultimately accumulate wealth. Black Americans and low-income communities often face systemic hurdles to capital accessibility, such as discriminatory lending behaviors and credit limitations. In a scenario of a debt limit breach, the odds of a credit crunch would increase, making loans for education, business growth, or home buying even harder to secure for these communities, potentially perpetuating cycles of economic hardship. 

Tradeoff in Policymaking 

These potential outcomes point to a trade-off in policy decision-making. While upholding fiscal responsibility and avoiding unchecked national debt growth is a valid concern, the uneven burden that a debt limit breach would impose on Black Americans and low-income communities requires careful consideration. Policymakers need to finely balance fiscal prudence with the potential social-economic ramifications of breaching the debt limit

Potential Solutions & Challenges 

Nevertheless, solutions to these issues are not simple. Policies aiming to bridge the racial wealth gap, like wealth redistribution or affirmative action, often meet political resistance or implementation obstacles. Likewise, initiatives to boost home ownership rates among Black Americans, such as housing vouchers or down-payment assistance programs, have to deal with broader market dynamics, including interest rates and housing supply. Capital accessibility, on the other hand, requires systemic alterations in lending practices and financial regulation, demanding a long-term, multi-faceted approach. 

In sum, the potential impact of breaching the debt limit on Black Americans and financially disadvantaged communities demands a thorough examination of wider economic and societal consequences. Policymakers should be aware of how their choices might disproportionately impact these communities, especially concerning racial wealth disparity, home ownership rates, and capital accessibility. The intricate relationship between fiscal policy and social equality requires a detailed and well-informed approach to policy-making. 

A debt limit breach provides a sobering lesson about the severe consequences of fiscal mismanagement. It highlights the significance of efficient and thoughtful economic governance, not only for maintaining macroeconomic stability but also for protecting society’s most vulnerable groups from unfair hardship. As the country continues to confront racial and economic inequality, the conversation around the debt limit serves as a stark reminder of the inherent overlap between economic policy and social justice. 

The task of addressing racial wealth disparity, racial homeownership gap, and capital accessibility is formidable. However, they are not insurmountable. It necessitates the combined efforts of policymakers, financial institutions, and the wider society to instigate substantial change. A debt limit breach and its potential repercussions should catalyze discussions on economic inequality and the immediate need for reforms. 

In order to bridge these disparities, the following is essential: 

  • It is essential to establish comprehensive, inclusive policies that promote access to quality education, fair lending practices, affordable housing, and wealth-building opportunities.  
  • Furthermore, these policies must be executed with an understanding of the distinct experiences and challenges faced by Black Americans and financially underprivileged communities. 

Against the potential damaging effects of a debt limit breach, the resilience and determination of these communities stand as a testament to their enduring spirit. However, this testament should not be required. The economic strategies and financial rulings of a nation should work to elevate its most vulnerable, rather than push them deeper into the fringes. 

In the final reckoning, the consequences of a debt limit breach underline the vital importance of financial responsibility at the national level. It also emphasizes the crucial role of mindful, inclusive policymaking in guaranteeing the economic prosperity of all citizens, especially Black and Brown citizens.  

As the country navigates these complicated economic landscapes, the focus must remain on fostering an environment of growth, fairness, and prosperity for everyone. It is crucial for fair economic planning that any agreement concerning the debt ceiling does not unjustly burden low-income citizens or strip them of vital services. 

Annual Report 2021: A Year of Growth

A Message from our President & CEO, Lenwood V. Long, Sr.

Friends and Family of The Alliance, 

It is with great pride that I present to you our first annual report, showcasing our work and impact in 2021. My sincere thanks to you for being a part of our incredible journey. Despite an extraordinarily challenging business environment, your dedication, generosity, and support helped us mark incredible achievements. We simply can’t say it enough: you are a huge factor in our accomplishments and future success. 

Since the founding of the Alliance in 2018, we have worked on building the foundation of our work by being unapologetically aspirational for wanting the best for our communities. We believe in redesigning systems to benefit those who are most marginalized. Closing the racial wealth gap is at the root of what we do. To that end we have worked to elevate the great and impactful work that Black-led CDFIs are doing in their communities and addressing their barriers to success. In this annual report, you’ll see that we now count 64 members from across the nation – strong Black leaders working together to build powerful administrative, economic, and human resources in their communities. We received multiple grant awards from organizations who believe in the work that we do, helping us to build administrative capacity, member-centered programs, and economic resources for Black-led CDFIs. It goes without saying that the ability to attract resources on this level is a testament to the individual and collective power of our growing family. To help us design an actionable path forward, our board, members, staff, and other invested stakeholders, underwent a 14-month intensive process to develop our three-year strategic plan. This year we launched the strategic plan to prioritize and center the needs of Black communities in our work. Our goal is to build a future where Black-led CDFIs are resource-rich and unrestricted in their ability to be catalysts for economic mobility, prosperity, and wealth building for Black families and communities. Rooted in an analysis of the nature and impact of economic exclusion of Black-led CDFIs, Black families and Black communities, and the multitude of interventions required to close the racial wealth gap, we are guided by three pillars: Building Capacity, Building Bridges, and Building Power, which we will highlight in more depth through this report. We’d like to thank you again for all that you are and all that you contribute. With your invaluable input, we will outperform expectations this year, building capacity, competitive skills, and empowerment bridges, for a better future.

Be Steadfast! 

Lenwood V. Long, Sr.

President & CEO, The Alliance

Check out our 2021 Annual Report: A Year in Review

The Alliance Releases PPP Impact Report

Our world changed in 2020. We have been through the unprecedented. The COVID-19 pandemic has caused economic turbulence across the world, and small businesses were unexpectedly affected. The pandemic revealed financial fragility within the small business community by shining a light on challenges faced by Black-owned small businesses and access to capital.

Historically, Black-owned businesses are more likely to seek, and less likely to receive capital for their business. Nearly three of four Black business owners say investment in Black-owned businesses still trails white- owned businesses (Businesswire). And the state of these businesses has only worsened. The COVID-19 pandemic has had a significant impact on Black-owned businesses’ health. While 58% of Black business owners report their businesses being in trouble, just 27% of white business owners say the same.

As a result, the federal government unveiled the Paycheck Protection Program (PPP) in 2020 to provide small businesses with funds to cover payroll, mortgage, rent and utility expenses. Thanks to the PPP program, 12 of our members were able to deliver a combined >$4.4 Billion in PPP loans to support small businesses that were impacted by the pandemic.

As you follow along, you will read more about the impact that our members have made in their communities, because we are committed to supporting and advocating for the growth of Black communities and Black executives leading Community Development Financial Institutions (CDFIs).

Check out the Alliance’s PPP Impact report.

Lenwood V. Long, Sr. Named President And CEO Of African American Alliance Of CDFI CEOs