Truist commits $40M to loan fund aimed at closing racial wealth gap
Truist Financial in Charlotte, N.C., has committed $40 million to help establish a new nonprofit loan fund intended to support diverse and women-owned businesses, with a particular focus on Black-owned small businesses.
The loan fund, CornerSquare Community Capital, will support community development financial institutions by purchasing 25% loan participations. Doing so essentially frees up capital so that CDFIs can make more loans to more small businesses.
"We're proud to support these impactful CDFI partners who share our vision to support underserved communities and provide a sustainable source of funding for racially and ethnically diverse and women-owned businesses that haven't had access to the traditional lending market in the past,” Truist Chairman and CEO Kelly King said in a press release.
The $504 billion-asset Truist is the latest bank to make a big-dollar commitment toward alleviating racial and economic inequality. Motivated by nationwide protests over the death of George Floyd in Minneapolis, big banks including Bank of America, Wells Fargo, U.S. Bancorp, PNC Financial Services Group and Citigroup, have all put up money to address the racial wealth gap on various fronts.
CDFIs, minority depository institutions and other nonprofits often figure prominently in these efforts. They are smaller and frequently closer to the communities banks aren’t reaching. They may be better able to work with borrowers with no or poor credit, and they often make much smaller loans than banks will typically make to small businesses, bankers say.
CornerSquare Community Capital will be a subsidiary of the nonprofit NC Rural Center, which has worked with small-business owners in low- and moderate-income communities in the area for over three decades. The new loan fund will also help the NC Rural Center expand its own lending and small business development programs across Truist’s footprint, the company said.
"The first-of-its-kind fund provided by Truist will allow our selected CDFI partners to do more with their existing capital, enabling them to expand their reach and scope across Truist's footprint and beyond, while increasing our collective support of historically under-resourced small businesses," NC Rural Center President Patrick Woodie said in the press release.
Truist named the Access to Capital for Entrepreneurs in Georgia, the Black Business Investment Fund in Florida and the Texas-based LiftFund among the CDFIs that CornerSquare would work with. It said the loan fund may add more CDFI partners over time.