CDFI is probably not an acronym most people use every day. But if you are a Black entrepreneur who has struggled to get a traditional bank loan, a contractor who needs working capital to take on a larger job, or a community trying to finance housing, childcare, or a health center, there is a good chance you know and appreciate the problem CDFIs were created to solve.
Community Development Financial Institutions, commonly referred to as CDFIs, are community banks, credit unions, loan funds, and other mission-driven lenders that invest in communities and businesses that traditional financial institutions have historically failed to serve or have been frankly underserved.
Right now, the federal government is attempting to eliminate or restrict a $289 million investment Congress appropriated for the CDFI Fund for fiscal year 2025. The fiscal year ends on September 30. The federal government has not completed the steps necessary to get that money in the hands of the institutions Congress intended to fund and without unauthorized conditions. Yesterday, I, alongside our co-counsel Crowell & Moring, filed a lawsuit against the federal government on behalf of the Freedom Economy Business Association seeking to stop that from happening.
As a lawyer who’s been doing this work for decades, this is one of the most straightforward legal cases of baseless government inaction, but the implications are far-reaching. We talk frequently about Black entrepreneurship and closing the racial wealth gap. Many Black entrepreneurs have the talent and ideas but lack access to capital. CDFI’s are one part of the infrastructure designed to address that reality. This administration’s actions have unnecessarily introduced the one thing that impedes business growth: uncertainty.
In fact, members of the Freedom Economy Business Association are already reporting reducing staffing and operations, taking on additional debt, and limiting their capacity to serve borrowers while they wait for federal funding. So, the harm to the plaintiffs is not theoretical – the damages are already here and mounting.
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