Wells Fargo Launches $400MM Small Business Recovery Effort
JUL 13, 2020 - 6:53 am
Wells Fargo unveiled details of an approximately $400 million effort to help small businesses impacted by the ongoing COVID-19 pandemic remain open, retain employees and rebuild. Through Wells Fargo’s new Open for Business Fund, the company will engage nonprofit organizations to provide capital, technical support and long-term resiliency programs to small businesses with an emphasis on minority-owned businesses.
Through June 30, Wells Fargo funded loans under the Paycheck Protection Program for more than 179,000 customers, with an average loan amount of $56,000, totaling $10.1 billion. Of the loans made, 84% of those were for companies with fewer than 10 employees, 60% were for amounts of $25,000 or less and 90% of applicants had $2 million or less in annual revenue. Given the federal government’s extension of the PPP, Wells Fargo will reopen its PPP loan application process to eligible customers as soon as possible through a link in Business Online Banking or CEO.
“By donating approximately $400 million in processing fees to assist small businesses in need, Wells Fargo’s Open for Business Fund creates opportunities for near-term access to capital and addresses the road ahead to meaningful economic recovery, especially for Black and African American entrepreneurs and other minority-owned businesses,” Charlie Scharf, CEO of Wells Fargo, said. “Wells Fargo is committed to helping small businesses impacted by COVID-19 stay open and get back to growth.”
According to data from Wells Fargo’s June Gallup/Small Business Index, more than half of small business owners surveyed expect either stagnant or decreasing revenues in the coming 12 months.
The Open for Business Fund’s initial grants will allocate $28 million to Community Development Financial Institutions (CDFIs), also known as nonprofit community lenders, aimed at empowering Black and African American-owned small businesses, which are closing at nearly twice the rate of the industry, according to the National Bureau of Economic Research. Among the first grantees:
Expanding Black Business Credit Initiative (EBBC) will support the launch of the Black Vision Fund to increase the flow of capital to Black-focused CDFIs for transformational work to close the racial wealth gap in African American communities. The CDFIs also will receive capital for urgent deployment to impacted businesses in the Mid-Atlantic, Southeast and Midwest.
Local Initiatives Support Corporation (LISC) will provide grants and low cost capital to more than 2,800 entrepreneurs with a focus on preventing loss in revenue, sustaining employment and averting vacancies among vulnerable small business owners in urban and rural markets nationwide.
“Black businesses have faced the largest shutdown of any diverse group in the country,” Ron Busby, Sr., CEO of U.S. Black Chambers, said. “We lost 41%, or 450,000 Black-owned small businesses, in this pandemic so far and all of those businesses provided jobs so we need to accelerate an economic agenda that helps them recover. The funding that Wells Fargo is putting back into Black businesses and other minority-owned small businesses across the country is truly going to be appreciated and will give the kick start entrepreneurs need to continue and grow.”
The Open for Business Fund is accepting applications from CDFIs and special purpose funds formed by CDFIs serving racially and ethnically diverse small businesses for its first grant cycle through Aug. 7. Additional grant cycles focused on technical assistance and recovery and resiliency will open later this year. Nonprofits can learn more here.
The Small Business Index, which provides a quarterly pulse check of sentiment from small business owners on their economic situations and the wider economic landscape, highlighted higher optimism on their financial outlook in June than in April. However, this was still 19% lower than in January, prior to the outbreak of COVID-19. In specifically oversampling African American, Hispanic, Asian and women business owners, June’s survey also observed that 52% of these owners felt the U.S. economy was in a recession or depression, while 26% said they did not feel very prepared or at all prepared for the economic downturn from the pandemic.
“June’s survey saw business owner optimism increasing as reopenings have been getting underway, but the overall data shows that for many, there’s still a long road to recovery,” Mark Vitner, chief economist at Wells Fargo, said. “The pandemic’s effects are also still being sorted out as communities across the country are in different stages of recovery, so optimism around indicators like revenues and number of jobs will continue to shift as those stages progress.”
Building a thriving small business sector has a lasting impact on communities and on job creation. Since 2015, the $175 million Wells Fargo Diverse Community Capital program has enabled more than 90 CDFIs to finance $1.6 billion in loans and offer 1.8 million hours of training to diverse small business owners, which have helped them sustain 195,000 jobs.
As part of the Diverse Community Capital program, the Wells Fargo Foundation and the National Association of Latino Community Asset Builders started the nation’s largest loan fund for Latino-owned small businesses with a $10 million grant.
Separately, in March, Wells Fargo announced it aims to invest up to $50 million in Minority Depository Institutions (MDIs) as part of its commitment to support economic growth in African American communities where MDIs, often community-based banks, provide mortgage loans, small business lending and other banking services.
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