Cupcakin’ Bake Shop: Fresh, artisanal cupcakes in San Francisco and Atlanta.
Cupcake Bake Shop
The Wells Fargo* Open for Business Fund was established with $420 million in processing fees from the Paycheck Protection Program to provide relief to struggling small businesses during the pandemic. By providing flexible grants to more than 200 nonprofit organizations, including community development financial institutions, the fund provided critical capital and technical assistance to 336,000 underrepresented entrepreneurs and helped preserve and create more than 461,000 jobs.
More than just money: The ripple effects of the Open for Business Fund
“When the pandemic hit, millions of businesses that serve the communities we love to call home immediately suffered – restaurants, hair and nail salons, daycare centers, bakeries and more. Many of them provided in-person services and had to close for public safety reasons,” explained Darlene Goins, chairman and head of philanthropy and community impact at the Wells Fargo Foundation.
Open for Business provided critical support to small businesses affected by the pandemic with a focus on flexible capital and technical assistance. Wells Fargo donated $420 million in PPP fees to the OFB Fund, which put the money back into local communities to support small businesses through more than 200 entrepreneurial support organizations and CDFIs, enabling them to provide a range of financial and advisory services.
The program also spurred significant additional investment, helping organizations raise more than $2.1 billion in public and private funding through grants. In total, more than $1.4 billion in loans, grants, and loan modifications were provided to struggling small businesses. Funding provided included grants, free or low-cost loans, loan modifications, and loan forgiveness, with a 3% interest rate cap to ensure solvency.
This effort prioritized underserved communities, of which 53% are women-owned businesses, the majority of which are women of color. In addition to providing direct support to businesses, the OFB Fund also strengthened the capacity of the organizations it supports. Nonprofits can use the funds to strengthen their balance sheets, add staff, upgrade technology, and develop language skills to build internal capacity so they can effectively serve their communities and continue to support small businesses in the long term.
Importantly, OFB’s success calls into question the notion that diverse entrepreneurship is an inherently risky investment.
The sweet taste of success: A baker’s tenacious journey
Lila Owens, founder of Cupcake n Bake Shop
Cupcakin’ Bake Shop: Fresh, artisanal cupcakes in San Francisco and Atlanta.
Cupcaken Bake Shop founder Lila Owens partnered with ICA, a CDFI that leverages a combination of venture capital tools and traditional debt financing to foster long-term success and community wealth building in the San Francisco Bay Area. ICA was one of 200 organizations to receive a grant from the Wells Fargo OFB Fund. In 2022, ICA made a $600,000 equity investment in Cupcaken Bake Shop to help Owens expand to more locations. Owens used the investment to open two new locations and create 12 jobs, adding to the 60 employees her company already had. Today, her bake shops have spread to seven locations, six in the Bay Area and one in Atlanta.
Owens’ journey began in 2007 when she began baking bread for friends and family. Her talent and passion saw her turn her hobby into a thriving business. The pandemic has brought challenges but Owens has weathered it with the help of an interest-free loan from the ICA and expert advice.
The support she received during this difficult time paved the way for ICA’s equity investment, which was crucial to Cupcake ‘n’ Bake Shop’s expansion. “We not only wanted capital, but the support of the network,” Owens says. She consulted with ICA about her growth trajectory, her capital needs to achieve that growth, marketing, talent, and the impact of inflation on quality ingredients and profits.
Cupcakes from Cupcakin’ Bake Shop.
Cupcakin’ Bake Shop: Fresh, artisanal cupcakes in San Francisco and Atlanta.
Currently, Cupcake n Bake Shop is exploring further expansion opportunities, including partnering with a national grocery chain, franchising, opening more company-operated brick-and-mortar locations, or a combination of all three. Despite facing economic headwinds such as inflation, Owens remains optimistic and adaptable, leveraging her network and strategic partnerships to continue to grow her business. Her story demonstrates the transformative power of flexible capital and strategic support for women entrepreneurs.
CDFI Innovation: Meeting the Needs of Underserved Small Businesses
MoFi, a Missoula, Montana-based CDFI, has been a vital source of capital for overlooked small businesses in the Rocky Mountain West for more than 40 years. The CDFI specializes in providing loans to entrepreneurs who don’t qualify for traditional bank loans because they have few assets, low income, lack of experience or are start-ups.
Before the pandemic, MoFi typically served about 50 to 100 businesses a year, providing loans of an average of $150,000 along with technical assistance to help borrowers achieve long-term financial stability and qualify for bank loans.
The onset of the pandemic presented unprecedented challenges for small businesses. MoFi adapted quickly, processing over 5,000 Paycheck Protection Program loans and becoming a large-scale lender. This rapid response was critical in helping businesses weather the initial crisis, but it left many businesses in a precarious financial position once PPP funds dried up.
A $2.1 million grant from Wells Fargo’s Open for Business Fund provided a lifeline for MoFi at this critical juncture. The grant enabled MoFi to take on more risk and provide much-needed capital to businesses struggling to recover from the pandemic. The funding enabled MoFi to streamline its lending process and reduce the time it takes to approve and disburse loans from 100 days to just a few days. The grant also served as a catalyst for additional funding, with MoFi leveraging the initial $2.1 million to distribute a total of $17 million to approximately 250 businesses.
Lessons learned from this experience transformed MoFi’s approach to lending. The organization adopted technology and streamlined its underwriting process. The OFB grant also highlighted the importance of flexible capital and the need for CDFIs to be prepared to respond quickly to emergency situations.
Heidi DeArment, president and CEO of MoFi, emphasizes the need for increased recognition and funding for CDFIs to maintain this level of support for small businesses. She advocates for a federal funding mechanism similar to the Federal Reserve window for banks and credit unions, which would ensure CDFIs have the resources they need to meet the growing demand for their services. By consolidating data and proving their effectiveness, CDFIs can make a strong case for increased support and continue to play a vital role in driving economic growth and opportunity in underserved communities.
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1 Comment
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