CDFIs Drive Capital to Small Businesses Despite Access Challenges
September 11th, 2025
Small businesses are the heart of America’s local economies. They create jobs, anchor neighborhoods, and often provide the first pathway to wealth-building for entrepreneurs. Yet across the country—and especially in rural communities, communities of color, and financially underserved regions— many small businesses struggle to access the capital they need to launch, grow, or weather economic shocks.
Community Development Financial Institutions (CDFIs) have a mission to expand economic opportunity in places long overlooked by traditional finance. CDFIs provide flexible capital and hands-on support for small businesses. This blog will provide an overview of small business challenges and HOPE’s lending efforts to increase capital access for small businesses in the Deep South.
Pre-existing Capital Gaps Disproportionally Impact Black and Brown Businesses
Small businesses are the backbone of local economies across this country – they account for 44% of U.S. economic activity.[1] For communities of color, small businesses are equally important. Black and Latino owned businesses employ over 7 million people.[2] Their importance is evident in the Deep South, also, where one in three businesses are owned by people of color and nearly 40% are owned by women.[3]
However, for many minority – owned businesses, their impact is greatly stifled by challenges in access to capital and affordable financial services. The Federal Reserve finds in their Small Business Credit Survey that minority-owned businesses are less likely to have a relationship with mainstream financial institutions like banks when compared to white-owned businesses. They show that less than a quarter (23%) of black owned businesses have accessed credit from a bank in the five years prior to 2020 while 46% of white-owned businesses have accessed credit through a bank over the same period of time. [4]
The Federal Reserve also finds that Black and Hispanic owned businesses have the least fully approved loan applications (32%) and highest rate of loan denials (47% and 51% respectively). See Figure 1.
Figure 1: Full Approved Small Business Loan Applications[5]
White-owned businesses, conversely, have the highest rates of full loan approval (56%) and lowest rates of denials (30%). See Figure 2.
Figure 2: Denied Small Business Loan Applications[6]
This lack of capital access means minority-owned businesses face significant challenges with expanding capital reserves, business growth, and maintaining adequate cashflow. These challenges are particularly acute given the impact of the rising costs of goods, interest rates, and tariffs. In a survey sample of HOPE’s business borrowers, we find that economic conditions have led over one third (35%) of borrowers to rely heavily on credit or loans to cover basic expenses. [7]
CDFIs Drive Capital Access
CDFIs expand access to capital for small businesses by dismantling the structural barriers that too often prevent entrepreneurs from growing, innovating, and achieving long-term stability. Unlike traditional lenders, CDFIs employ flexible, relationship-based underwriting, pair financing with hands-on technical assistance, and intentionally invest in communities that mainstream financial institutions have exited—particularly rural and low-income areas. This holistic, mission-driven approach ensures that viable small businesses are not excluded simply because of where they are located or whom they are owned by. According to Opportunity Finance Network (OFN), CDFIs have cumulatively deployed more than $120 billion in financing, supporting over one million small businesses and helping create or preserve 3.4 million jobs nationwide.[8] Reflecting this scale of impact, certified CDFIs currently hold more than $25 billion in small business and microloans on their balance sheets.
HOPE Makes It Happen
Hope Enterprise Corporation began operations in 1994 as the Enterprise Corporation of the Delta, a loan fund and business development organization established to expand access to support jobs in 55 economically distressed river counties and parishes in Arkansas, Louisiana and Mississippi. Since its first small business loan to a cabinet manufacturer in the Arkansas Delta, HOPE has made roughly 6,800 business loans totaling over $1 billion. Throughout its history, the organization has excelled in bridging capital gaps for women and people of color. For example, over half of HOPE’s business loans were made to women and people of color in FY2024.[9] See Figure 3. HOPE achieves these outcomes by deploying financial products and services designed to address the needs of diverse entrepreneurs and by leveraging a range of private and public resources.
Figure 3: HOPE Business Lending by Race, FY2024
Persistent capital gaps continue to limit the growth and resilience of small businesses, particularly for small businesses of color and those operating in rural and historically underserved communities. Small businesses ownership and access to capital are critical for decreasing the racial wealth gap. While white adults have 13 times the wealth of Black adults, the gap closes to three to one when comparing the median wealth of white business owners to Black business owners.[10] Closing the racial wealth gap has the potential to increase the national Gross Domestic Product (GDP) between $1 and $1.5 trillion by 2028.[11]
CDFIs demonstrate that a different approach to lending is both possible and effective. By pairing flexible, relationship-based capital with technical assistance and intentionally investing in places overlooked by traditional finance, CDFIs help small businesses grow, stabilize, and contribute meaningfully to their local economies. HOPE’s experience in the Deep South is evident of CDFI impact. By meeting entrepreneurs where they are and designing financial products that reflect local realities, HOPE has helped thousands of businesses launch, expand, and sustain operations, while advancing job creation and narrowing wealth gaps in the process.
[1] Small Business Administration. (2019). “Small Business GDP, 1998–2014”. https://advocacy.sba.gov/2019/01/30/small-businesses-generate-44-percent-of-u-s-economic-activity/
[2] National Center for Science and Engineering Statistics, U.S. National Science Foundation, & U.S. Census Bureau. (2024). Annual Business Survey: Employment Size of Firm for Business Characteristics of Respondent Employer Firms by Sex, Ethnicity, Race, and Veteran Status for the U.S.: 2022. Economic Surveys, ECNSVY Annual Business Survey Characteristics of Businesses, Table AB2200CSCB04. Retrieved September 9th , 2025, from https://data.census.gov/table/ABSCB2022.AB2200CSCB04?q=AB2200*&nkd=QDESC~B20.
[3] Hope Policy Institute Analysis of the SBA Office of Advocacy, “2024 Small Business Profiles For the States, The District of Columbia, and the U.S.,” July 2025. Includes both employer and non-employer firms.
[4] “2020 Report on Employer Firms: Based on the 2019 Small Business Credit Survey.” 2020. Small Business Credit Survey. Federal Reserve Banks. https://doi.org/10.55350/sbcs-20200407
[5] “2024 Report on Employer Firms: Findings from the 2023 Small Business Credit Survey.” 2024. Small Business Credit Survey. Federal Reserve Banks. https://doi.org/10.55350/sbcs-20240307
[6] “2022 Report on Firms Owned by People of Color: Based on the 2021 Small Business Credit Survey.” 2022. Small Business Credit Survey. Federal Reserve Banks. https://doi.org/10.55350/sbcs-20220629
[7] Hope Policy Institute. (2025). “HOPE Member Pulse Survey: Initial Insights”. http://hopepolicy.org/blog/hope-member-pulse-survey-initial-insights/
[8] Opportunity Finance Network. (2025).” Made by History. Made for this Moment”. https://www.ofn.org/impact/
[9] HOPE Credit Union. (2025).”2024 HOPE Impact Report”. https://www.hopecu.org/impact-reports/2024-hope-impact-report/
[10] Association for Enterprise Opportunity, “Tapestry of Black Business Ownership in America: Untapped Opportunities for Success,” Feb. 2017, https://www.aeoworks.org/images/uploads/fact_sheets/AEO_Black_Owned_Business_Report_02_16_17_FOR_W E B.pdf
[11] McKinsey and Company, “The Economic Impact of Closing the Racial Wealth Gap,” Aug. 13, 2019, https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-economic-impact-of-closingtheracial-wealth-gap
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