Lessons Learned from Small Business Lending During COVID-19: A Case Study of the California Rebuilding Fund

As the COVID-19 pandemic forced California businesses to shut down in March 2020, the fate of small businesses, which often had fewer reserves to draw upon when trying to survive the shutdowns, became particularly concerning. Federal aid measures, including the Paycheck Protection Program (PPP), brought relief to many business owners, but their deployment also confirmed what many small business advocates feared: business owners in the most vulnerable communities and underrepresented business owners often struggled to obtain assistance. At the same time, small business lending capital dried up. Many banks and fintechs slowed their lending. Mission-driven lenders with experience serving underrepresented communities—like community development financial institutions (CDFIs)—received more applications than they could possibly fund and had limited established channels to attract new funding quickly. A coalition that spanned government, universities, small business advocates, lenders, and concerned private citizens came together to design a solution that would leverage public funds with private dollars to provide low-cost capital to small businesses that were rebuilding after COVID-19 via loans from CDFIs. The result was the California Rebuilding Fund (CARF). This report provides a brief history of the creation of the CARF; details its structure, loan terms, and application process; highlights lessons learned from its creation and implementation; and looks forward as this fund continues to operate in California and as other states or localities consider establishing similar funds.