{"id":271001,"date":"2025-12-01T10:00:52","date_gmt":"2025-12-01T15:00:52","guid":{"rendered":"https:\/\/ncrc.org\/?p=271001"},"modified":"2025-12-01T10:19:32","modified_gmt":"2025-12-01T15:19:32","slug":"funding-futures-scale-links-new-secondary-market-for-cdfi-loans-is-strengthening-underserved-small-businesses","status":"publish","type":"post","link":"https:\/\/ncrc.org\/funding-futures-scale-links-new-secondary-market-for-cdfi-loans-is-strengthening-underserved-small-businesses\/","title":{"rendered":"Funding Futures: Scale Link’s New Secondary Market for CDFI Loans is Strengthening Underserved Small Businesses"},"content":{"rendered":"

Locally-owned small businesses are almost universally admired. Yet, in a banking industry where bigger is seen as better, warm words rarely translate into hard cash.<\/span><\/p>\n

Small businesses have become a viable pathway towards economic mobility for entrepreneurs and the cornerstone of community development revitalization efforts in historically underinvested communities. However, minority-owned businesses have had to overcome multiple barriers when it comes to securing the necessary capital to establish and scale their businesses.<\/span><\/p>\n

\u201cThese businesses tend to be in formerly redlined areas where traditional banking and lending institutions don\u2019t have many branches, making traditional loan products and services inaccessible,\u201d said Manan Shah, policy advisor at NCRC. \u201cAccessing low-interest, flexible capital to launch and sustain their businesses over a longer period has been a huge challenge.\u201d<\/span><\/p>\n

Given that the vast majority of these businesses often seek out smaller loan amounts (less than $100,000), traditional banking institutions tend to see little reward from the increased financial risk attached to them. Community financial development institutions (CDFIs) are often the only option for BIPOC and women-run small businesses to obtain this much-needed financing \u2013 although CDFIs have their own funding limitations as well.<\/span><\/p>\n

\u201cCDFIs operate like small businesses themselves so they encounter similar capacity issues that their clients are dealing with,\u201d said Shah. \u201cWith recent political attacks on the CDFI ecosystem, like the mass layoffs at the Treasury\u2019s CDFI Fund, existing capacity issues will get worse.\u201d<\/span><\/p>\n

To help capacity-constrained CDFI capital move faster and smoother, Scale Link created <\/span>a secondary market business model <\/span><\/a>where they purchase small-dollar loans from CDFIs, bundle the micro-loans to make them more convenient for banks to buy and then route that revenue back to the CDFIs. Scale Link’s system also generates additional donated funds from the banks that further supports the overall funding stream given to small business CDFI borrowers.<\/span><\/p>\n

This model allows historically underserved CDFIs to receive the funding they need to support small businesses while allowing banks to <\/span>meet their Community Reinvestment Act (CRA) requirements<\/span><\/a> towards serving all communities more equitably.\u00a0\u00a0\u00a0<\/span><\/p>\n

\u201cOne thing that was important to us in the creation of Scale Link was ensuring that our success was based on our ability to deliver value to our partners,\u201d said Jonathan Brereton, CEO of Scale Link (which is itself a CDFI). \u201cWe raised money to launch and\u2026 for new projects along the way, but we were very intentional about not raising ongoing operating subsid[ies]. We did not want to compete with our CDFI partners for scarce resources.\u201d<\/span><\/p>\n

The key component of the success of Scale Link\u2019s small-dollar CDFI loan origination program has been their intentionality around meeting a real gap in loan servicing, creating a solution that met the needs of all stakeholders and incorporating their feedback at every step of the creation and implementation process.\u00a0<\/span><\/p>\n

\u201cAt the end of the day though, it is a question of talking to the users of the product, designing with them in mind and then keeping that dialogue open,\u201d said Brereton. \u201cIf we are insistent on creating products that must pay for themselves, the greatest indicator is going to be if people continue to pay for it.\u201d<\/span><\/p>\n

Scale Link, alongside its cross-sector partners, have found a sustainable and innovative way to build economic security for communities, addressed a business challenge for CDFIs and established an avenue for traditional banking institutions to engage in more equitable lending practices. Effective collaboration between banks, CDFIs and financially underserved communities has long been critical to closing the nation’s widening wealth gaps. But it’s especially urgent now, as federal cuts undermine CDFIs and small business development programs.<\/span><\/p>\n

Timantha Goff is the Managing Editor for NCRC’s Communications team.<\/em><\/p>\n

Photo caption: Eric Chung of Scale Link beneficiary 3-3-3 Food Truck (photo courtesy of Brenton Gieser of Opportunity Fund).<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Locally-owned small businesses are almost universally admired. Yet, in a banking industry where bigger is seen as better, warm words rarely translate into hard cash. Small businesses have become a viable pathway towards economic mobility for entrepreneurs and the cornerstone of community development revitalization efforts in historically underinvested communities. However, minority-owned businesses have had to 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Goff","author_link":"https:\/\/ncrc.org\/?s=timantha+goff"},"uagb_comment_info":0,"uagb_excerpt":"Locally-owned small businesses are almost universally admired. Yet, in a banking industry where bigger is seen as better, warm words rarely translate into hard cash. Small businesses have become a viable pathway towards economic mobility for entrepreneurs and the cornerstone of community development revitalization efforts in historically underinvested communities. However, minority-owned businesses have had to…","_links":{"self":[{"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/posts\/271001","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/users\/4019"}],"replies":[{"embeddable":true,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/comments?post=271001"}],"version-history":[{"count":0,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/posts\/271001\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/media\/271007"}],"wp:attachment":[{"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/media?parent=271001"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/categories?post=271001"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/tags?post=271001"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}