The State of Goldman Sachs’ Small-Business Lending

Episode Summary

Executive Summary: The episode examines how Goldman Sachs and its partners responded to the early COVID-19 small-business crisis, first with local emergency loan funds and then by channeling PPP capital through CDFIs and mission-driven lenders. Margaret Anadu argues that this approach better reached very small, minority-owned, and underserved businesses while highlighting the need for continued advocacy, broader community investment, and long-term recovery policies.

Main Topics: Early crisis response before federal relief (Priority: 5/5): Goldman Sachs acted before PPP launch by creating emergency loan funds in New York and Chicago with local government and mission-driven lenders to provide fast, low-cost capital to small businesses. Designing the PPP strategy around data and access gaps (Priority: 5/5): The team used pulse surveys to measure demand and identify who was being left out, finding high overall interest but significant disparities in access, especially for Black-owned businesses. Channeling capital through CDFIs and mission-driven lenders (Priority: 5/5): Goldman Sachs committed $250 million and later doubled it to $500 million for PPP lending, distributing funds through CDFIs and adding $25 million in grants to expand lender capacity. Impact on very small and underserved businesses (Priority: 4/5): The lending reached businesses with a median of three employees, lower-than-average loan sizes, and significant deployment in low-income and minority neighborhoods. Partnerships that unlocked local reach (Priority: 4/5): Examples included the Brooklyn Navy Yard, churches in the South, and community lenders like Hope Enterprise, showing how trusted local networks improved access and awareness. Broader recovery needs beyond loans (Priority: 5/5): Anadu argues small businesses must be heard in policymaking and that recovery requires addressing housing, jobs, healthcare, education, and broadband in underserved communities.

Key Arguments: Small businesses needed capital immediately, so Goldman Sachs used public-private partnerships before federal relief arrived. Data was essential to ensure relief reached the businesses most in need rather than only those already banked or well-connected. CDFIs and mission-driven lenders were the best vehicles for equitable PPP distribution because they already serve underserved communities and know how to reach them. Black-owned businesses faced meaningful access barriers in both application and approval rates, and many had very limited cash reserves. Philanthropic support for lender operations was necessary because processing a brand-new federal program at speed required hiring and technology upgrades. The capital reached extremely small firms and helped many survive by covering bills, retaining staff, or adapting operations. Recovery policy should elevate small-business voices directly and address structural inequities in communities hit hardest by the pandemic.

Data Points: Time since CARES Act at the start of the interview: About seven weeks - Shows how early the conversation took place after PPP creation. Emergency loan fund interest rate: 0% - Goal of the New York emergency small-business loan fund. PPP strategy follow-on surveys: Second pulse survey sent to thousands of small-business owners - Used to gather data on access and demand. PPP application interest among respondents: More than 90% tried to apply - Survey result showing strong demand for PPP. Confidence among approved borrowers: Nearly 80% said they were confident their business would survive - Survey result among businesses approved for PPP. Capital committed for small-business lending: $250 million, later doubled to $500 million - Goldman Sachs commitment to make PPP loans through mission-driven lenders. Organizations funded: Six organizations - Lending facilities provided through CDFIs and mission-driven lenders. Minority-led organizations funded: Four of six - Part of the lending facilities were provided to minority-led CDFIs. Black-led CDFIs: Two of the most active in the country - Highlighted as part of the lending network. Grant support for lender capacity: $25 million - Used for hiring and technology upgrades at community lenders. Loans made to date: 8,000 - Approximate number of loans reached through the approach around the country. Median employee count of borrower businesses: 3 - Indicates the very small scale of firms reached. Average loan size: About $61,000 - Less than half the average PPP loan nationwide. Smallest loans mentioned: As little as $500 - Examples from Alabama and Ohio. Capital to low-income communities: One-third - Share of deployed capital going to businesses in low-income communities. Capital to minority neighborhoods: Roughly half - Share of deployed capital going to minority neighborhoods. Loans reached in Brooklyn Navy Yard partnership: Over 60 businesses - Example of location-based outreach. Lending in New Orleans by Hope Enterprise: Over 60% to poor neighborhoods and almost 80% to Black communities - Illustrates effective targeting in a hard-hit city. Unbanked or underbanked Black households: Nearly half - Used to explain structural access barriers. Lower-income households losing jobs in March: 40% of households with incomes of $40,000 or below - Fed data cited to emphasize concentrated economic harm.

Pivotal Quotes: "the goal was to get 0% interest loan capital to as many businesses as possible, as quickly as possible" — Margaret Anadu: Describing the first emergency loan fund created before PPP launched. "they were 12% less likely to be able to apply. And out of those who applied, you know, they were 12% less likely to actually get through that queue and get the approval" — Margaret Anadu: Explaining disparities faced by Black-owned businesses in the PPP process. "They're going to need to be heard" — Margaret Anadu: Summarizing what small businesses need beyond financing in the recovery phase.

Implications: The discussion suggests recovery depends on trusted local intermediaries, targeted capital, and policy that centers underserved businesses. Future relief and rebuilding efforts should pair financing with advocacy and infrastructure investment.