Expanding small business access to credit by strengthening community development credit unions

Small business lending is widely offered by community development credit unions (CDCUs) , but it requires specialized expertise and infrastructure that can be difficult for small and mid sized institutions to access. As a result, many credit unions see small business lending and loan participations as complex activities that may be beyond their reach. Inclusiv, a national network of more than 450 CDCUs with 20 million members and nearly $300 billion in collective assets, is working to change that perception by demonstrating how collaboration and the right support can make small business lending more accessible, allowing CDCUs of all sizes to share risk, expand their lending capacity, and serve more entrepreneurs.

Through its Small Business Capital Initiative, Inclusiv built a Loan Participation Marketplace that lets CDCUs originate small business loans and sell participations to other credit unions, — turning what was once an isolated, one-off activity into a coordinated, capital-efficient system.

We spoke with Inclusiv about what this work was designed to change, what it revealed about the barriers to CDCU collaboration, and what it will take to scale the model nationally.

What was this work designed to change?

The Small Business Capital Initiative was designed to help CDCUs start and expand their small business lending programs. At the center of this work is a Loan Participation Marketplace that connects credit unions and creates opportunities to share risk and access capital. Combined with training and technical assistance, the initiative provides CDCUs with the tools and support they need to build their lending capacity and serve more small businesses in their communities.

What shifted as a result?

The initiative has demonstrated that with the right support and a trusted intermediary, CDCUs of different sizes and across different markets can successfully collaborate to expand small business lending. In its first year, with support from Mastercard Strive USA, the Loan Participation Marketplace facilitated more than $3.6 million in small business loan participations among four CDCUs across three regions, including rural communities. More importantly, it has shown how this model can help credit unions overcome perceived barriers, share risk, and create new opportunities to serve small businesses.

What has historically made it difficult for credit unions to start and expand small business lending?

Loan participations, which are the primary mechanism for credit unions to finance loans together, require substantial due diligence and documentation. A purchasing credit union must generally evaluate a participation as though it had originated the loan itself, establish its own participation policy and underwriting standards, execute detailed agreements, and comply with borrower, lender, net-worth, and concentration limits. The originating lender must also retain part of the loan throughout its life. These protections promote safety and soundness, but they can also make individual transactions expensive and time-consuming. Small business loans present additional challenges because they vary widely by industry, collateral, loan purpose, repayment structure, and borrower circumstances.

Capacity has been another constraint. Small business lending requires experienced personnel for underwriting, portfolio monitoring, risk grading, servicing, collections, and loss mitigation. Smaller credit unions may not be able to maintain all these capabilities internally, and even when third-party expertise is used, the credit union remains responsible for decision-making and oversight.

Another significant challenge is the lack of loan participation solutions tailored to CDCUs. Traditional loan participation marketplaces primarily serve mainstream credit unions and may not accommodate the deeper lending and innovative underwriting approaches CDCUs use to reach underserved small businesses. As a result, CDCUs often struggle to find participation partners and solutions that align with their mission and lending practices, limiting their ability to expand their programs and reach more entrepreneurs.

Why does this work matter for your members and the small businesses they serve?

Supporting CDCUs results in expanding the supply of affordable capital for small businesses. Access to affordable capital then enables these entrepreneurs to do things like purchase equipment, hire employees, and withstand economic disruptions. The scale is significant: an analysis of deep impact small business lending among 52 CDCUs through Inclusiv’s Financial Inclusion Data Analytics Platform (FIDAP) in 2025, showed that $530M was in CDFI investment areas; $97M was to borrowers in persistent poverty counties and $766M was deployed to rural communities

These benefits extend beyond individual borrowers. Stronger small businesses create good local jobs, stabilize neighborhood commercial corridors, circulate wealth locally, and expand opportunities for families and communities.

What did you learn that others in the field should pay attention to?

We have seen that access to capital alone is not enough to expand affordable small business lending. CDCUs also need trained staff, practical underwriting tools, efficient processing and servicing, regulatory support, and assistance designing lending programs that fit their institutions and communities. Shared infrastructure can make business lending feasible for smaller credit unions that could not economically maintain every specialized function in-house.

A second lesson is that standardization and flexibility must work together. Participation structures make it easier for credit unions to collaborate and share loans. At the same time, CDCUs must retain the ability to use relationship-based underwriting and respond to entrepreneurs whose circumstances may not fit conventional credit models. Inclusiv’s first small-business loan-pool purchase demonstrated that a trusted intermediary can help institutions assemble compliant, high-impact transactions while sharing responsibility and risk.

Finally, increasing lending requires strengthening the entire pathway between entrepreneurs and capital. Entrepreneurs benefit from a clear entry point, pre-screening, guidance, and connections to an appropriate lender; credit unions benefit from partnerships with community organizations, technical-assistance providers, government, philanthropy, and specialized service providers. The field should therefore pay attention not only to how much capital is deployed, but also to whether investments leave CDCUs with stronger systems and deeper relationships within their local small-business ecosystems.

What is the next phase of this work?

The next phase is about building on what we have learned and creating a model that can grow beyond our initial group of participating credit unions. To achieve this, we are strengthening our internal infrastructure and exploring how technology can simplify processes and make loan participations more efficient and accessible.

As we expand, training and technical assistance will remain central to our approach. We recognize that CDCUs operate in different markets with unique needs and opportunities, so our strategy will have a stronger regional focus. This will allow us to tailor our support, develop local partnerships, and help more CDCUs build and expand their small business lending programs.

Ultimately, our vision is to create a sustainable model that can be replicated across the country while remaining responsive to local markets. We want to give CDCUs the flexibility and capacity to lend deeper, develop innovative products, and expand access to capital in the communities that need it most.

How are you working with the broader ecosystem to make it easier for small businesses to access responsible capital?

We do see ourselves as an ecosystem builder, connecting the institutions, capital, technology, and expertise needed to make responsible small-business lending easier to deliver and navigate at a macro level. Inclusiv works with entrepreneurs, CDCUs, state government, federal programs, mission-aligned investors and philanthropic initiatives like Mastercard Strive USA, blending local knowledge with resources and trusted relationships.

As an example, a $5 million investment by New York State is expected to support the purchase of more than $15 million in loans, demonstrating how public and philanthropic dollars can crowd in responsible private lending. The partnerships behind this program are helping to build a more coordinated pathwayso that underserved entrepreneurs face fewer barriers and community lenders can sustainably serve more businesses.

What gives us optimism is the growing recognition that underserved entrepreneurs do not lack talent, viable ideas, or opportunities. What they often lack is access to financial institutions that understand their strengths and are willing to look beyond traditional lending approaches.

What gives you optimism about the future of small business lending?

We are encouraged by the growing collaboration across the small business ecosystem. More organizations are recognizing the value of working together to expand access to affordable capital and support community lenders. This collective effort is creating new opportunities for CDCUs to strengthen their lending capacity and reach more entrepreneurs.

We are particularly excited about how advancements in technology can transform small business lending. Processes that have traditionally been complex and time-consuming can become more efficient, giving lenders more time to understand the people and businesses behind each loan. By combining these advancements with the deep community relationships that define CDCUs, we have an opportunity to make lending more efficient while making it even more human. This means greater capacity to understand complex cases, develop creative solutions, lend deeper, and give more entrepreneurs the opportunity to turn their dreams into reality.