Comment: State’s $40 million stake will aid small businesses

By Lauren Anderson and Beto Yarce / For The Herald

As a local small business owner and the executive director of a Community Development Financial Institution, we are celebrating the bipartisan creation of a new fund by the Washington Legislature and Gov. Jay Inslee to make partnerships like ours possible for more people here in Snohomish County and across our state.

Our economy works well for many people and businesses; but the traditional financial system has a stubborn tendency to make it difficult for many to pursue prosperity. That’s why the newly adopted bipartisan Equitable Access to Credit Act, which creates a fund of up to $40 million over the next five years in our state for Community Development Financial Institutions (CDFIs), is such a big deal.

As a single mom, Lauren had a great idea and plan for opening a local bakery but didn’t have the type of credit score and income that a traditional banking institution looks for when they qualify borrowers for a loan. And Beto, as an immigrant from Mexico who sought opportunity in our region by starting his own business selling jewelry at a farmers market, knew first-hand how our traditional financial institutions and access to capital were often unavailable to historically underserved communities. Our region is the proud home of many large and successful corporations. The challenge is lowering barriers for young businesses and those considered not a good fit for traditional financial institutions.

By passing the Equitable Access to Credit Act, Washington state took a big step toward addressing that challenge. The law creates a new fund to help CDFIs offer technical assistance services to more people and provide responsible loans to more borrowers who may otherwise be vulnerable to predatory operators. CDFIs are typically non-profit organizations certified by the state Department of the Treasury that are mission-driven in their work to provide capital to those who have historically been locked out of prosperity. CDFIs are usually not depositories and so they rely on government, philanthropic donations and financial support from large institutions for capital to provide loans to borrowers that banks deem too risky or unqualified. There’s nothing wrong with banks pursuing a profit when making loans; but CDFIs help fill in a gap to help provide financial resources for those facing hurdles like medical debt, poor credit scores or other challenges so that fewer people are left behind.

Part of the mission of CDFIs is to provide coaching and training to borrowers, so that they can responsibly manage their finances and perhaps one day partner with a traditional financial institution.

At Grain Artisan Bakery in Snohomish, Lauren was having a lot of success selling to customers at farmers markets while she was renting a commercial kitchen, but she needed help purchasing her own equipment — like a dough sheeter (imagine a rolling pin on steroids) — when she was moving into her own brick-and-mortar bakery. The restaurant business is a tough one with thin margins, and Lauren was having trouble securing a loan for her growing young business from a traditional bank.

By contrast, a CDFI could take the time to learn more about her vision, her business model and invest in her dream in a way that wouldn’t fit in a model at a traditional financial institution. Lauren also enrolled in courses offered by CDFIs to help borrowers plan payrolls, prepare legal filings and develop solid business plans. Beyond just lending to borrowers, a CDFI’s goal is to help them take the next steps to be successful in the long-term.

We are sharing our story together because we are excited that Washington’s new program will make our story possible for more people here in Snohomish County and across our state.

In the world of business, up to $40 million over five years may not seem like a lot, but it will make a meaningful difference for CDFIs and those that rely on them for support. In 2021, CDFIs invested more than $115 million in our state and offered more than 8,000 hours of technical services such as business coaching to borrowers. With the adoption of the Equitable Access to Credit Act, we are excited to see both of those numbers grow.

Lauren Anderson is the owner of Grain Artisan Bakery in Snohomish, a small business with 17 employees. Beto Yarce is the executive director of Ventures, a local Community Development Financial Institution (CDFI) and member of the Washington Community Investment Coalition.