The White House on Friday followed through on threats to conduct further layoffs of civil servants as the government shutdown showed no sign of easing–and one department dedicated to expanding access to capital across the country got the ax completely.
The Treasury Department reportedly eliminated 1,400 positions on Friday, including all staff members of the Community Development Financial Institutions Fund. The CDFI Fund, first established in 1992, injects capital into distressed areas nationwide and is a resource utilized by some small businesses struggling to find capital.
Housed under the Treasury Department, the program offers funding to CDFIs such as banks, credit unions, and venture capital funds. This funding from Congress helps support the CDFI networks lending capabilities, either helping expand them or modernize existing systems.
“Laying off the entire staff of the Community Development Financial Institutions (CDFI) Fund at the U.S. Department of the Treasury is a devastating – if not fatal – blow to a critical apparatus that supports small businesses,” says John Arensmeyer, CEO of the Washington, D.C.-based advocacy organization, Small Business Majority.
It’s an unusual move considering that the CDFI Fund historically received bipartisan support, though the Trump administration already attempted to do away with it back in March, albeit unsuccessfully.
CDFIs don’t simply just offer capital, but extend other services such as business coaching, training programs, incubator help and mentor services. They’re propped up in all 50 states, plus all 435 congressional districts, according to CAMEO Network, a California-based business network focused on small business growth.
CDFIs are considered lifelines to some communities, especially those operating in banking deserts–though their utilization rates among small businesses could be improved. A 2023 survey conducted by the Federal Reserve Board shows that just six percent of small businesses surveyed had sought out capital from a CDFI.
That said, CDFIs are still pulling their weight among the entrepreneurial community. The CDFI Bond guarantee program dispersed $54.5 million to small businesses during fiscal year 2024.
While CDFIs may not be the first stop for capital for most entrepreneurs, stripping it of its team is a blow to access to capital. That, in turn, could result in one less bucket of capital for entrepreneurs already navigating an economically tense environment hampered by tariffs and other uncertainties.
Melissa Angell
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