CDFIs are Building a Stronger Economy Through Small Businesses

In every town across America, there's a corner store, a family-run diner, or a small tech startup tucked into a co-working space established by someone determined to pursue their passion, no matter how little support they had to start with.

Take the story of a mother and daughter duo who started with a folding table and buckets of blooms for sale from the local farmer’s market in Detroit. After years of hard work, they own a vibrant flower shop proving that when opportunity meets community investment, dreams can uplift communities.

Multiply that story by millions and you get the heartbeat of the U.S. economy. Small businesses make up 99.9% of all U.S. firms and employ nearly half of the nation’s workforce. With 500 employees or fewer, small businesses have been a powerhouse of job creation. Between 1995 and 2023, they have generated 20.2 million net new jobs, nearly 7 million more than large businesses over the same period. In 2021 alone, these enterprises contributed over $16.2 trillion in revenue, underscoring their critical role in driving economic growth and stability across the country.

Community Development Financial Institutions (CDFIs) fill a critical gap for small businesses that often lack the capital, staffing, and operational capacity to sustain their operations. Where traditional financial institutions might see risk, CDFIs see potential and offer financial and technical assistance, training, and back-office support that bridge critical gaps. This empowers entrepreneurs to innovate and generate revenue, ultimately fueling economic growth and building a more inclusive economy.

For example, Dorchester Bay Economic Development Corporation (DBEDC) played a vital role in launching the Daily Living Recovery House by providing a $60,000 loan. The Daily Living Recovery House was founded by Phil Reason with a mission to offer a compassionate, recovery-focused environment designed to support holistic well-being and empower individuals on their journey to rebuild their lives. The loan enabled the purchase of essential furnishings, covered startup utilities and marketing. Additionally, DBEDC offered personalized guidance and support, demonstrating a deep commitment to helping him achieve long-term success.

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Many small businesses face common barriers such as early-stage failure, rising labor costs, and fluctuating inventory expenses. CDFIs combat these challenges by offering accessible capital, personalized support, and resources that promote sustainable growth and long-term resilience.

Takes a Village Transportation is another example of how small businesses are rising to meet community needs in a challenging economic climate. Founder Amia Mize received a $50,000 loan from ACE | Access to Capital for Entrepreneurs which allowed her to hire drivers and purchase vehicles driven by her mission of delivering “one safe ride at a time.” Since then, Mize has provided safe transportation for more than 1,500 students. Recently, she launched a new app offering on-demand child transport services, mirroring the convenience of larger ride-share platforms. Mize’s innovation, combined with ongoing support from ACE, led to her becoming a preferred vendor with Atlanta Childcare Services and securing a new contract to further expand her impact.

ACE, celebrating its 25th Anniversary this year, has deployed over $250 million in capital to nearly 3,000 businesses, resulting in more than 23,000 jobs. Similarly, DBEDC has provided $7.6 million in loans to small businesses, supporting the creation and retention of 1,330 jobs. This data affirms the essential role CDFIs play in bridging the gap left by traditional financing institutions.

Nationwide, the CDFI industry manages over $222 billion in mission-driven capital that directly strengthens the U.S. economy. These funds flow into small businesses, affordable housing developments, and community projects that create jobs, improve financial health, and expand access to opportunity.

Entrepreneurs continue to seek assistance from CDFIs because these institutions remain grounded in the communities they serve and committed to economic inclusion. For small businesses, especially those in historically underserved communities, trust in mission-driven financial institutions is rooted in the belief that someone is willing to invest in their vision.

In today’s uncertain economic landscape, institutions like CDFIs contribute to the evolving state of small businesses by not only helping entrepreneurs thrive but strengthening entire local economies and shaping a more equitable financial future.

To learn more about CDFIs and how they drive economic opportunity in underserved communities, visit resources such as the U.S. Department of the Treasury’s CDFI Fund, Opportunity Finance Network, and CDFI Coalition. For a deeper understanding of the work led by Black-led CDFIs and their impact, explore resources and insights from The African American Alliance of CDFI CEOs at www.aaacdfi.org.