U.S. Bancorp is partnering with Community Reinvestment Fund USA to help small-business borrowers who don’t qualify for bank loans obtain financing from community development financial institutions, the two organizations said Monday.
Referral partnerships between banks and CDFIs are common, but Community Reinvestment’s platform, called Connect2Capital, promises to streamline the process and ultimately boost the number of small-business borrowers who obtain loans from CDFIs.
"We think of Connect2Capital as an online matchmaking service for borrowers and CDFI lenders," Steve SaLoutos, the metropolitan bank division manager at Minneapolis-based U.S. Bank, said in a press release. "Any time we can support mission-driven lenders that strengthen local economies in the communities where we do business, it benefits the entire financial ecosystem."
Community Reinvestment Fund, also based in Minneapolis, created the platform in 2017 and U.S. Bank is its first bank partner in Connect2Capital. The platform works by providing an online marketplace where small-business borrowers can fill out some information about their borrowing needs and then compare financing options from an array of CDFI lenders.
"CRF has more than 30 years of experience investing in communities and small businesses to create jobs and economic vitality," Frank Altman, its founder and CEO, said in the announcement. "With our new U.S. Bank partnership, together we're helping to fulfill our mission of empowering people to improve their lives and strengthen their communities through innovative financial solutions."
Part of the motivation is to help small businesses access cheaper financing than they might get if they turned to a for-profit online marketplace. Patrick Davis, the vice president of program strategy and development at Community Reinvestment, said that most of the CDFIs currently on the platform charge between 8% and 11% on their loan products, with the highest interest rate offered right now at 18%. About 15 CDFIs are on the platform, and Community Reinvestment is working to bring more on board daily, he said.
Connect2Capital also gives its financial institution partners a dashboard that will help it track the status of small-business borrowers it has not been able to finance. Additionally, Davis said the platform gives the bank socioeconomic data, like the poverty rate or area median income, about the market areas where those businesses are located, which the bank can then present when it’s examined for Community Reinvestment Act compliance.
U.S. Bank said in the announcement that the partnership will help it retain banking relationships with small businesses that may not yet qualify for a traditional bank loan, but use other banking products and services.