Wells Fargo Pledges $400 Million To Support Small Businesses

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Wells Fargo & Co will give away all of its proceeds from the Payroll Protection Program in order to aid in the recovery of small businesses from the COVID-19 pandemic. The exact amount pledged is currently sitting at $400 million.

According to data from the company’s June Gallup/Small Business Index, the next 12 months will be met with decreasing or stagnant revenues for at least half of the surveyed small businesses.

The Financial Game Plan

The company will join forces with nonprofit organizations to provide small businesses with capital, technical support, and long-term resiliency programs through its Open For Business Fund. Businesses owned by minorities will be given priority assistance, with at least $28 million to be allocated to African-American entrepreneurs.

This was emphasized in an interview with Mary Mack, the company’s president of consumer banking. “If we look at the communities we serve and the intent and spirit of the program, we believe it was to lean in to help those businesses that were perhaps the most fragile,” she explained.

Throughout June, more than 179,000 customers were funded by the company under the PPP, with an average of $56,000 allocated per individual, leading to a total of $10.1 billion. Of all loans given, 84% were to companies that have less than ten employees. From that group, 60% were given at most $25,000, and 90% of these applicants only had an annual income of at most $2 million. Since there has been an extension of the PPP by the federal government, Wells Fargo will once again accept eligible PPP applicants via a link in Business Online Banking® or CEO®.

Charlie Scharf, Wells Fargo’s CEO, explained that “by donating approximately $400 million in processing fees to assist small businesses in need, Wells Fargo’s Open for Business Fund creates opportunities for near-term access to capital and addresses the road ahead to meaningful economic recovery, especially for Black and African-American entrepreneurs and other minority-owned businesses.” He then added, “Wells Fargo is committed to helping small businesses impacted by COVID-19 stay open and get back to growth.” 

The Open For Business Fund

According to the National Bureau of Economic Research, the fund’s initial grants will see Community Development Financial Institutions – aka nonprofit community lenders – receive an allocation of $28 million. The goal is to enable minority-owned small businesses to survive and thrive since they are twice as likely to close compared to the rest of the industry.

Among the first grantees is the Expanding Black Business Credit Initiative (EBBC), which aims to address the racial wealth gap in African American communities by supporting the launch of the Black Vision Fund in order to increase the flow of capital to Black-focused CDFIs for transformational work. CDFIs in the Mid-Atlantic, Southeast, and Midwest are also to be given priority for receiving capital support.

Another of the first grantees is the Local Initiatives Support Corporation (LISC), which targets more than 2,800 entrepreneurs, providing grants and low-cost capital to sustain employment, stave off revenue losses, and preventing any vacancies from occurring among the vulnerable small businesses in both urban and rural markets across the country.

Ron Busby, Sr., CEO of US Black Chambers, Inc said that “Black businesses have faced the largest shutdown of any diverse group in the country.” He added, “We lost 41%, or 450,000 Black-owned small businesses, in this pandemic so far and all of those businesses provided jobs so we need to accelerate an economic agenda that helps them recover. The funding that Wells Fargo is putting back into Black businesses and other minority-owned small businesses across the country is truly going to be appreciated and will give the kick-start entrepreneurs need to continue and grow.” 

The Small Business Index

The Small Business Index provides a quarterly pulse-check of the wider economic landscape and sentiment from small business owners on their economic situation. Though higher optimism on their financial outlook was highlighted in June compared to April, it was still about 19% lower than in January, a few months before the pandemic reached US shores. 

In an oversampling of female and racial minority business owners, the survey conducted in June showed that around half of these owners felt that the US economy has entered a depression or recession, while about a quarter of them felt unprepared for the damages brought about by the pandemic.

Not Alone In The Fight

Meanwhile, other major lenders like Citigroup, Inc. have decided to make use of the stimulus packages they receive from the government to support small businesses that are adversely affected by mandatory COVID-19  shutdowns. However, those banks stated that they will use the fees generated to cover the costs of all the necessary infrastructure needed to keep the program running.

Compared to Wells Fargo’s average of $56,000/business owner, JPMorgan Chase & Co has contributed an average of $123,000. According to a Reuters analysis of program data released on July 6, Chase and Bank of America Corp provided 4,258 plus 3,345 loans of at least $1 million, compared with Wells Fargo’s 929.