North Carolina CDFI Leverages Social Capital for Equitable Development with Wells Fargo Grant

Jamie McCall, VP, Policy and Research, Carolina Small Business Development Fund (CSBDF)

Guest blog post written by Jamie McCall, VP, Policy and Research, Carolina Small Business Development Fund (CSBDF). CSBDF is a recipient of a Wells Fargo Diverse Community Capital Activator award.

Since 2017, Carolina Small Business Development Fund (CSBDF) has partnered with North Carolina’s Historically Black Colleges and Universities (HBCUs) to foster a spirit of entrepreneurship both on campus and in the surrounding neighborhoods. Over the years we have been proud to grow this model to include education institutions that are not HBCUs but nevertheless serve large Black student populations:

Why This Model of Intervention?

The ability of HBCUs to kindle sustainable development is well-documented. There is a strong consensus among scholars that these types of organizations are catalysts for sustainable development because they lower economic inequality, build human capital, and promote social mobility. How do they do it? There is a common theme — social capital networks.

Social capital in this sense refers to network interactions among HBCU students, local community members, and small businesses in adjacent neighborhoods. As CSBDF’s research has shown, these types of interactions are critical components of community economic development. Places and individuals with diverse social networks are linked with more sustainable and equitable development. And as we begin the long road of recovery from the pandemic, social capital is more important than perhaps ever before.

Many Methods, One Mechanism of Action

CSBDF’s educational partnerships vary widely in terms of programmatic emphasis and format, but the theme of leveraging social capital is our guiding North Star. For example, in partnership with Johnson C. Smith University, we created an inclusive procurement training course. The course, held over several weeks and designed to promote social network interactions between participants and CSBDF’s partners, taught entrepreneurs how to better access public sector procurement contracts. Working with officials from the City of Charlotte, the program uniquely prepared participants for contracting opportunities with the city government. Surveys of program graduates indicate very positive outcomes:

  • 8 in 10 participants registered with the City of Charlotte vendor within 30 days of graduation
  • Graduates projected their small business revenues would increase by a mean of $247,316 over the next 12 months
  • About 73% of entrepreneurs entered the program with a profitable business, but 98% expected they would be profitable when they graduated
  • Current small business owners estimated that the program helped them retain a mean of 2.1 full-time employees and 1.3 part-time employees

And Then the Pandemic Happened

Calling the COVID-19 pandemic “unprecedented” at this point is almost cliché, but the economic shock it caused was indeed unlike anything the small business community has ever seen. Like most CDFIs, we saw overwhelming demand for our services — loans, technical assistance, and (for the first time) grants. We were able to quickly pivot and expand our capacity, including vastly expanding our free digital learning academy.

We were able to add these new programs and services quickly in no small part because of the generosity of our funders. In particular, Wells Fargo’s decision to allow Diverse Community Capital awardees the ability to use funds for operating expenses was critical. Leveraging those funds (and our organizational social capital!), we launched partnerships with Mecklenburg County, the City of Durham, Durham County, the City of Raleigh, and North Carolina’s state government. In 2020, this allowed us to provide almost $17.3 million in capital to small businesses across 1,117 loans and grants. This represented the largest distribution of funds in our 30-year history.

CSBDF has always been intentional about making inroads into historically marginalized communities. The above chart shows the proportion of our loans and grants that went to the diverse constituencies we served during 2020. We are proud to report that with Wells Fargo’s support we were able to exceed those goals in every way. Our commitment to helping minority-owned, women-owned, veteran-owned, and low income-owned firms remains steadfast. There is still much more work to do, but 2020 has shown us how thinking “outside the box” and using social capital can have a disproportionately high impact for the diverse small businesses we serve.

Helping Black-owned Businesses Thrive

The Wells Fargo’s Diverse Community Capital initiative enabled CSBDF to help hundreds of Black-owned small businesses during the hardest months of COVID-19. One example is Errand Girl, a Durham-based concierge service owned by Tina Travis. Errand Girl received a rapid recovery loan through the North Carolina Rapid Recovery Program, a statewide CDFI initiative. The business also obtained financing through CSBDF’s Durham Loan Program, a pandemic recovery initiative launched in conjunction with the City of Durham. The entrepreneurial spirit of Errand Girl has been chronicled on NPR’s Marketplace.

Research shows a holistic approach to small business assistance is key for entrepreneurial success. CSBDF’s underwriting and business solutions staff were proud to work extensively with Travis both before and after the loans were issued. “In this uncharted atmosphere, it was refreshing to work with the CSBDF team,” Travis says. “I felt the staff had a true sense of what businesses were going through… I felt like I was in a trusted set of hands. You are saving the hopes and dreams of business owners.” CSBDF was proud to make sure Errand Girl had all the resources it needed to survive and thrive.

Learn more about CSBDF’s evidence-based approaches to small business interventions, including leveraging social capital.