Setting up a Local Small Business Emergency Relief Fund: Lessons from Three First Movers
By Bruce Katz, Colin Higgins, and Michael Saadine
In partnership with Accelerator for America and The Governance Project
April 8, 2020
As the COVID-19 crisis continues to wreak havoc on communities and small businesses across the country, local and national actors have realized the enormity of the economic challenge at hand. After two weeks of record unemployment claims, it is abundantly clear that the economic shutdown is already causing unprecedented damage, especially to small businesses.
Policymakers have taken action, most notably through the ~$350 billion Paycheck Protection Program, which has shifted into high gear and already processed $70 billion. Despite this momentum, all initial indications are that these programs are unlikely to serve a substantial part of the small business market, particularly underserved small businesses that are owned by persons of color and/or located in low- and moderate-income neighborhoods. These enterprises lack close ties to the mainstream banking system, are unlikely to be able to tap Small Business Administration SBA relief programs and are in dire need of objective technical guidance and support.
Fortunately, cities, counties, states and a group of alternative lenders have stepped into the breach and have created a parallel system for addressing the urgent needs of underserved small businesses that is providing a variety of grant and loan products that are fit to purpose. These efforts have emerged as a critical lifeline for the most vulnerable small businesses.
Last week we profiled five emerging typologies of these funds. Below we seek to expand on our typologies and show local leaders the nuts and bolts that go into operationalizing these funds, while providing practical resources for them to set up their own funds. We profile three first mover funds: The Birmingham Strong Fund; The Erie County Revenue and Gaming Authority’s Bridge Loan Fund; and The Indy Chamber’s Rapid Response Fund. Each fund uses a different model to get resources to the most vulnerable businesses in its community.
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