Small Business COVID-19 Lending Programs: Fostering Social Capital and Financial Stability
Carolina Small Business Development Fund Research Report and Brief
Released in February 2021
In times of crisis, investment in entrepreneurial ventures tends to decline. Early data suggest the decline in small business investments due to the pandemic will be historic in scope and depth. Community development lending practices aim to sustain small firms until they can resume their normal course of business. Affordable financing provides capital injections into small businesses which can help cushion against COVID-19 induced economic shocks. Using Carolina Small Business Development Fund’s lending data as a case study, this analysis considers the effect of three COVID-19 response programs. We believe the findings are likely generalizable to lending activities by other community development financial institutions (CDFIs).
WHY THIS MATTERS
The economic recession spawned by the pandemic requires innovative solutions. CDFI loan programs are oriented towards doing this via creating a “social safety net” of Main Street businesses that boost social capital development, community trust, and financial stability. Our preliminary models suggest CSBDF’s small business lending has been helpful in promoting financial stability during this time period. The effect appears to be stronger when lending is targeted at certain underserved constituencies, especially minority business owners.
ARTICLE - DOWNLOAD:
Sabatelle, Jason, Caramintzos, Adonis, and Jamie McCall. 2021. “Small Business COVID-19 Lending Programs: Fostering Social Capital and Financial Stability.” Carolina Small Business Development Fund. Raleigh, NC. https://doi.org/10.46712/covid.lending.