The unique partnership at the center of California’s new loan match program

A unique and first-time partnership between two mission-driven organizations, Next Street and Community Reinvestment Fund USA, is behind a new small business lending program in California that aims to connect small businesses with historic federal funding designed to help them grow and strengthen their financial resilience.

By Sandy Fernandez

When Sacramento-based Dr. Donna Lee needed capital to scale her online mindfulness coaching offerings, she turned to a nascent lender-match platform, California Small Business Loan Match, that pairs California entrepreneurs with pre-vetted lenders to supply them with an affordable loan for their business growth plans.

The program, which is bolstered through a unique and first-time partnership between two mission-driven organizations, Next Street and Community Reinvestment Fund USA, aims to equip entrepreneurs, particularly those from socially and economically disadvantaged backgrounds, with responsible lending options backed by the state, and to cultivate a healthy economic climate. Most of the dozens of lenders involved in the program are Community Development Financial Institutions (CDFIs) that are already vetted by IBank, the state economic development agency running the program. IBank’s Loan Guarantee Program helps reduce the risk for lenders when they provide loans to small businesses that might not qualify for traditional bank loans.

Through the CA Loan Match platform, Dr. Lee connected with a California-based CDFI, Working Solutions, which ultimately granted her a loan of $25,000. Her business model previously relied on only 1:1 virtual business coaching sessions and wIth this capital, Dr. Lee can now build out a series of online courses, add additional staff, and invest in marketing her business, Dr. Donna Lee, Intuitive Spiritual Mindset Coach.

A Unique Partnership

IBank launched California Small Business Loan Match in late April 2024 as a tool to help disperse the state’s $1.2 billion allocation from the U.S. Department of Treasury’s State Small Business Credit Initiative (SSBCI). The SSBCI program, funded through the American Rescue Plan Act of 2021, is designed to help states address the challenges small businesses face securing financing. California received the largest allocation of the $10 billion program, which makes funding available to all 50 states and U.S. territories, the District of Columbia, and Tribal governments. Another important impetus of the program is to fast-track the delivery and awareness of affordable capital to the communities and businesses that need it most — those, for example, with lower credit scores or a previously-defaulted loan — ensuring opportunities are available to all entrepreneurs and not just to those who qualify for capital through a traditional bank.

Loan Match has its roots in Next Street’s work for the Initiative for Inclusive Entrepreneurship (IIE), which was incubated by Mastercard Strive USA grantee Hyphen Partnerships and brings together public, private, and philanthropic entities from around the country to share best practices and lessons learned for implementing SSBCI (Hyphen is a fiscally-sponsored project of Panorama Global). IIE had previously identified California as a prime market to pilot a one-stop-shop loan match program like the California Small Business Loan Match. IIE also helped make the partnership between Next Street and Community Reinvestment Fund, USA (CRF) happen by providing flexible philanthropic capital for start-up costs as well as broader credibility and support.

From IBank’s perspective, the partnership just made sense — Next Street provided a comprehensive go-to-market strategy that included positioning, advertising, and brand support while CRF, who they had already been in discussion with, had the technology, tools, and networks to match small businesses with multiple lenders via its proprietary matching algorithm and compliance expertise. Philanthropic backers of both organizations, including JP Morgan Chase and Mastercard Strive USA, also supported the partnership given the shared mission of helping more small businesses succeed and making California Small Business Loan Match successful.

With Next Street handling the top-of-funnel marketing and CDFI outreach to spread the word about the program, and CRF integrating the technology, making sure lenders are following up on inquiries within three days and getting entrepreneurs to the point of a completed loan application, the early numbers have started to back up the effectiveness of the partnership. Since CA Loan Match launched in April 2024, as of October 2024 the website has had over 123,000 views with over 4,000 applications submitted, resulting in more than 2,600 matches between small businesses and lenders. Fourteen loans have been funded so far, a number which IBank expects to increase significantly as they work to improve conversion rates based on the lessons learned to date.

A New Way Forward

The pilot phase of the CA Loan Match officially ended in June 2024, but both CRF and Next Street are staying involved as it evolves. In collaboration with IBank, CRF will continue to manage the back-end of the website, Loan Match pre-application and lender oversight, while Next Street explores further paid marketing and advertising strategies, as well as California ecosystem partnerships.

Programs such as these are typically executed with a more siloed approach, with one organization taking full ownership of the launch. This can be challenging because many organizations in the small business sector have a narrow focus, sometimes by design, but more likely due to limited resources, so it can be difficult to manage the types of large-scope, multi-dimensional projects necessary to strengthen small business ecosystems. Partnerships, like the one between Next Street and CRF, could open the door to a more beneficial model, particularly when a ‘better together to support mutual interests’ philosophy is at the foundation of the union. Outside-the-box collaborations between mission-driven CDFIs, private sector businesses, and philanthropic entities are pivotal in this moment, as no single CDFI has the bandwidth and resources to work alone.

If this model can be replicated in other states and territories with active SSBCI programs, entrepreneurs nationwide, like Dr. Lee, stand to benefit.

Sandy Fernandez is vice president of North America at the Mastercard Center for Inclusive Growth and leads the Mastercard Strive USA program.