1
FINANCING SMALL BUSINESS GROWTH AND RESILIENCE SEPTEMBER 2026
Community Investment Management Capricorn Investment Group
2
Responsible Financing for Small Business Growth and Resilience
1
Small businesses constitute the vast majority of enterprises around the world, accounting for 90% (World Bank 2026) of businesses globally and 99.9% of businesses in the US (Main 2026). They are the largest source of employment in most countries, providing more than half of all jobs in the US and nearly 70% of jobs in countries like India, Brazil, and the Philippines (IFC 2025). Many point to access to finance as a key barrier for small businesses. Globally, nearly 70% of micro and small businesses do not access funds from financial institutions (Ramalho et al 2018) while in the US, 60% of small business applicants experience a funding gap (Johnson 2024). However, not all financing is beneficial. High cost or poorly structured credit, especially when misaligned with cashflow, can leave small businesses worse off than if they had received no financing at all. In this context, Community Investment Management (CIM) was launched in 2014 to provide strategic debt capital to demonstrate and scale responsible innovation in lending for underserved communities. Over the past 11 years, the team has partnered with more than 50 inclusive financial technology companies (“fintechs”) serving small businesses and low-income households, and assessed many times more.
1
Please see important disclosures on page 13.
Over the past decade, a new generation of tech-enabled cashflow solutions has emerged among the companies that CIM evaluates. These solutions use transaction and invoice data to underwrite short-term liquidity products that more precisely match small-business needs. While many of these fintech lenders support business growth and resilience, others offer expensive and misleading products that trap businesses in debt. These predatory models are growing quickly because small businesses lack the lending protections that safeguard consumers. Without those protections, responsible lenders face disadvantages in the quest for scale.
CIM seeks to help responsible lenders by providing bespoke debt facilities that allow them to establish portfolio volume and demonstrate traction. CIM seeks to help responsible lenders by providing bespoke debt facilities that allow them to establish portfolio volume and demonstrate traction. In addition, as part of the Responsible Business Lending Coalition, CIM advocates to embed protections for small businesses in the US.
3
Why Capricorn Investment Group Invested in CIM The following reflects Capricorn Investment Group’s assessment and investment rationale at the time of its decision. Capricorn is an investor in CIM’s flagship strategy focused on North America (“US Strategy”) and its emerging markets strategy (EM Strategy, and collectively with the US Strategy, the “Strategies”), and CIM’s management company and General Partner (collectively, “the Firm”). CIM did not compensate Capricorn, directly or indirectly, in connection with this white paper.
Capricorn Investment Group (“Capricorn”) is an outsourced chief investment officer (OCIO) focused on long-term capital deployment across strategies that seek to combine financial returns with measurable impact. Capricorn first invested in CIM’s US Strategy in 2016, was a founding investor in CIM’s EM Strategy, and acquired a minority ownership stake in the Firm in 2021. When Capricorn evaluated CIM, two things stood out. First, Capricorn believed that CIM’s technology-enabled lending strategy had structural advantages that make sense for long-term capital deployment. Second, CIM had built a differentiated model that takes risk management and responsible lending seriously. These characteristics directly address the small business financing gap described earlier.
Investment Opportunity Technology-driven efficiencies allow fintech platforms to reduce costs and friction across the entire lending lifecycle, from origination and underwriting to funding, servicing, and risk management. These operational efficiencies create economic value that can be shared between borrowers and lenders. In Capricorn’s view, this segment of credit provides enhanced risk-adjusted return poten-
tial relative to liquid credit markets, driven by the illiquidity premium and the operational efficiencies of the technology-native model. The diversification profile is substantially differentiated from traditional private lending. Portfolios contain thousands of amortizing loans rather than dozens of concentrated positions, significantly reducing idiosyncratic risk. This diversification also means capital reaches thousands of small businesses rather than being concentrated in a handful of large borrowers. The amortizing structure of many of the loans which CIM finances is attractive from a capital efficiency perspective. Unlike bullet loan portfolios that tie up capital for extended periods, continuous amortization and technology-enabled servicing allow for efficient capital recycling. As small businesses repay loans and grow, capital can be redeployed to support additional borrowers, multiplying impact over time. The short duration profile of these portfolios provides flexibility and quick response times. Short durations should allow the CIM team to immediately identify credit risk and respond to credit deterioration more quickly. In periods of credit stress, capital is expected to return faster and should be able to be redeployed at more attractive terms.
4
Why Capricorn Investment Group Invested in CIM
CIM’s Differentiated Approach For Capricorn, what distinguishes CIM’s strategy is its sophisticated approach to structuring and risk management. As in all forms of credit, long-term value creation depends on preserving capital and minimizing losses when conditions tighten.
CIM has developed a rigorous framework for structuring first-loss provisions, performance triggers, and risk-sharing mechanisms to provide meaningful downside protection. These protections are particularly valuable during periods of credit stress, when default rates rise.
CIM’s due diligence process evaluates the sustainability of each platform’s business model, the quality of its risk management infrastructure, and the transparency of its borrower relationships. This combination of structural discipline and emphasis on responsible lending aligned directly with Capricorn’s investment criteria and was central to the investment decision.
5
The Small Business Financing Gap Globally, the SME (Small and Medium-Sized Enterprises) financing gap is estimated to be $5.7 trillion (World Bank 2026). That gap is estimated to be between $350-750 billion in the US alone (Curley et al 2025). As a consequence of this financing gap, small businesses operate with limited cash reserves, leaving them vulnerable to even minor
disruptions. Surveys show that 70% of small businesses in the United States have less than
four months of cash on hand (Pymnts 2024), and 82% of closures cite cashflow problems as a primary cause (US Bancorp 2023). These pressures affect even well-managed and growing businesses. In one survey, 40% of small business owners said that if late payments continued, they could be forced to close within the year (Intuit 2023).
Fintech-enabled Cashflow Solutions These credit and liquidity gaps have created an opportunity for digital lenders to serve small businesses in new ways to meet the exact liquidity challenges that small businesses face. They use alternative and real-time transaction data to underwrite borrowers that traditional banks, which primarily rely on conventional financial statements and collateral, often cannot serve.
Their data sources can include paymentprocessing histories, invoicing records, marketplace sales, inventory movement, and other digital signals that provide a more accurate and timely view of a business’s financial health. In the US, 44% of borrowers served by fintechs would have been unlikely to get bank credit (Barkley 2021).
79%
72%
77%
Share of applicants at least partially approved at source 45%
By Credit Risk of Firm, Prior 12 Months (% of loan, line of credit, and cash advance applicants at source) Low credit risk
Medium/high credit risk
SOURCE: Federal Reserve System 2024 Survey
Online lender
Large bank
N=203 and 440
N=599 and 321
6
By embedding credit products within platforms that businesses already use, fintechs lower acquisition costs and reduce repayment risk through automated deductions from revenue streams. This model allows lenders to reach users directly through trusted channels such as marketplaces, payment processors, or software tools. Because repayment can be linked to realtime revenue activity, the financing experience is smoother for business owners and provides lenders with stronger visibility into cashflow.
These capabilities have enabled fintechs to design cashflow products such as factoring, reverse factoring, invoice credit, and supplychain financing that closely match business needs. For example, a lender may finance inputs and deduct repayment only after sales occur, or use invoice-based financing to help businesses cover production and shipping costs.
CIM Investee: R2 In Latin America, portfolio company R2 partners with digital platforms to offer financing solutions via an API-based, end-to-end, whitelabeled experience. The fintech makes use of innovative data to underwrite underserved businesses, and embed credit offers directly within merchant dashboards on partner platforms such as Rappi, Uber, and PayU, with repayment capacity assessed in real time. In various Latin American countries, R2 has partnered with companies like Rappi, Uber, and PayU to provide credit to merchants on their platforms. These partnerships give R2 visibility into transaction data and digital payment flows, which it uses to assess small businesses’ repayment capacity and performance. R2 evaluates this data to underwrite merchants and then extends pre-approved credit offers directly within the merchant dashboard, without requiring additional steps. The credit extended to sellers allows them to invest in inventory, marketing, and growth initiatives, with repayments deducted
automatically as a fixed percentage of sales over the following months. This structure has enabled R2 to extend credit to thousands of small businesses and to expand merchants’ access to financing over time. On average, loan sizes grow by almost 40% between the first and second loan and continue to increase over time. Because loan sizes are closely tied to sales, this growth in credit access reflects underlying revenue growth for small businesses, supported by R2’s financing products. CIM’s capital enabled R2 to grow their business in Chile and then scale up to Mexico, growing from 2,834 borrowers in December 2023 to 46,053 by December 2025. That success captured the attention of global fintech Ant International, which made a strategic investment in R2 in late 2025.
7
CIM Investee: Quantum In the US, CIM’s portfolio company Quantum is similarly making use of fintech underwriting innovations to offer loans to overlooked small businesses. Over the course of the past ten years, Quantum has developed an underwriting capability that is more inclusive than many lenders on the market thanks to their use of a wide variety of alternative data. In addition to underwriting innovation, Quantum
also makes use of unique partnerships with banks to acquire and engage users. To start, the fintech functions as a service provider
to banks, augmenting their technological capabilities to action credit assessments and rules more quickly and efficiently. When users are approved, the banks lend and serve users as normal. However, when users are rejected, Quantum functions as a second-look lender. The fintech executes its own credit assessment for users who are rejected by bank partners and onboards those it approves directly. The team notes that many businesses they onboard are too small or too risky for banks to approve.
Fintech Risks While these models are encouraging, growing access to fintech credit does not come without downsides. The rapid growth of fintech and small businesses’ need for short-term liquidity have enabled new harder-to-recognize forms of predatory lending described by Federal Reserve researchers as “higher-cost and less-transparent credit products” (Federal Reserve 2019). These lenders exploit the lack of regulatory guidelines for small business financing, lending in ways that often set small businesses up to fail. One common practice that can mask the high costs of these financing products involves expressing the cost of a loan only as a “fixed fee,” and failing to disclose an annual percentage rate (APR). Since fixed fees do not reflect loan tenor, they make it very difficult to compare pricing and can easily mask exorbitant pricing for
short duration loans (which are typical among cashflow solutions). For example, imagine a customer considering a bullet payment loan offered online at a 10% fixed fee. That customer would probably be surprised to realize that the loan over 18 months would have an APR of only 6.7%, whereas the same terms over two months would result in an APR of nearly 60%. That small business owner may confuse the “fixed fee” rate with an interest rate and overlook the massive range in effective cost when they are comparing this financing offer to other, more transparent financing offers. This practice is commonly used by merchant cash advance (MCA) providers, which are experiencing phenomenal growth in the US. Valued at close to $19 billion in 2024, the market is expected to grow to over $24 billion in the next ten years (Yahoo 2024).
8
These MCA products are also famously short in duration, meaning that small business owners rarely have the chance to execute the business cycle needed to generate the revenue to power repayment.
Issues like these may explain why satisfaction rates with online lenders are systematically lower than with other financial service providers.
Satisfaction with lenders (% of loan, line of credit, and cash advance applicants approved for at least some financing at source)
Small bank N=573
70%
Credit union N=146
66%
Large bank N=720 Finance company
59% N=278
Online lender N=540
50% 28%
Neutral
8%
25%
8%
31%
10%
37% 46%
Satisfied
22%
13% 26%
Dissatisfied
SOURCE: Federal Reserve System 2024 Survey
To address these risks, CIM was an early member of the Responsible Business Lending Coalition (RBLC), a multi-stakeholder coalition that advocates for small business financial protections in the US. The RBLC has advocated for responsible lending standards across the country in line with the Small Business Borrowers’ Bill of Rights, a set of responsible lending standards which it launched in 2015 and has over 100 signatories and endorsers. Since its formation, the RBLC has helped support eight bipartisan laws, benefiting 6.4 million business owners with truth-in-lending standards and other financial protections2. By establishing regulatory rules of the road that mandate transparency, these laws help prevent a race-
2
Based upon data provided by RBLC.
to-bottom dynamic among small business lenders and establish competition that rewards the development of innovative financing products that truly help small businesses.
9
Community Investment Management’s Approach CIM serves as a strategic growth partner to responsible fintechs by structuring assetbacked debt facilities. These facilities enable lenders to multiply their capacity many times over by allowing them to leverage their equity capital as a first-loss layer, significantly increasing lending capacity. For example, in the case of Konfio, a fintech bringing a full suite of digital financial services to small businesses in Mexico, CIM helped the team quickly scale a small business credit card product over a period of just two years. In the case of Stori, which provides low- and medium-income customers with their first credit card, CIM structured a lending facility
when the team had less than a year of traction and only a few thousand users. The fintech “graduated” from CIM’s lending several years later with over 100,000 users, demonstrated economies of scale, and a proven lending model. This approach allows CIM’s capital to be recycled efficiently while maintaining high levels of transparency and traceability. With clear visibility into exactly which loans its capital is funding, CIM can track each borrower and their repayment journey over time. This ensures that every dollar invested is deployed directly to end users and monitored throughout the life of the loan.
Company 1* $4000 $3500
$3,423,729,958
$3000
$2000
$50
$30
$1500
$20
$1000
$0
$56,253,652
$40
$2500
$500
Company 2* $60
$10
$8,350,000
$80,600,000 $0 Cumulative capital made available by CIM
Cumulative creditenabled to end borrowers
CIM’s structured debt vehicles allow for capital to be recycled many times over to drive access to credit. In the case of Company 1, a small business lender in the US, $80 million of capital from CIM has enabled nearly $3.5 billion in credit for small businesses over a period of four years. By funding loans to small businesses directly and via specific eligibility criteria, CIM capital allows
Cumulative capital made available by CIM
Cumulative creditenabled to end borrowers
fintech partners to recycle capital at a faster rate and also upsize their facilities over time. Similarly, in Mexico, Company 2 has leveraged
$8 million from CIM to deliver $56 million in loans to small businesses in just 15 months, showcasing the power of debt facilities to drive expansion and outreach of lending activities.
*These tables feature real data from CIM partners, whose names are not being disclosed for reasons of privacy.
10
Over the past eleven years, every dollar managed by CIM has enabled nearly 20 times that amount in credit for the underlying customers served by portfolio company fintechs. Since launching in 2014, CIM has facilitated more than $30 billion in credit for close to 20 million borrowers
across North America and several emerging markets, including Mexico, Colombia, Peru, the Philippines, Chile, India, and Indonesia. In the US, CIM estimates that 53 percent of the businesses it has funded are women-, minority-, or military veteran-owned.
Impact Assessment Assessing impact and adherence with responsible lending practices is a core part of CIM’s due diligence process. The team’s financial inclusion expertise powers a detailed look at product terms and conditions, along with analysis of how products deliver value to users. CIM considers transparency in pricing, underwriting rigor, product design, and alignment between lender and borrower success as key factors. These considerations are assessed through CIM’s impact scorecard that integrates best practices from consumer protection principles, responsible lending practices, and secondary research. Products that contribute to over-indebtedness or debt spirals are excluded, while those that deliver clear and tangible value to users are prioritized. This approach ensures that predatory or misaligned products are screened out early in the investment process. In addition, the team conducts regular impact reporting and collaborates with partners like 60 Decibels and Dalberg Advisors to assess borrower outcomes as critical inputs into portfolio management. For example, CIM partnered with
60 Decibels to conduct an impact assessment among the borrowers of its Latin American portfolio company Finkargo to understand how access to trade financing can improve incomes and resilience of small importing businesses. That study found that after a year of working with Finkargo, business owners were able to grow their supplier bases by an average of 30% and their overall operations by over 50%. In the US, a recent study with another borrower, Atticus, found that small businesses were able to grow their teams from 11 members to 14 members within just one year.
11
Key Issue: Digital lending platforms struggle to access competitive funding rates in early stages
Early Stage Digital Lenders
Bottleneck
Limited Capacity
Need large capital to make loans
Accessing sufficient working capital
Difficulty scaling operations
Community Investment Management: Strategic growth partner providing asset-backed debt funding
Partner
Provide
Result
With innovative lenders with responsible practices
Competitive assetbacked debt funding
Multiply lending capacity of equity by 5-20x
Looking Ahead As fintech has become a central part of how customers buy and sell goods and services, credit products have become more specific and more accessible. Fintech lenders are closer to users, have more access to data, and are innovating tailored products that more precisely meet the needs of users. While this is largely positive, forms of predatory lending are also more difficult to identify and monitor in a digital context. For impact investors, lending to small businesses presents an important opportunity. As fintech continues to shape how small businesses access
credit, the opportunity to design products that are more transparent, better aligned with cashflow, and more responsive to user needs is expanding. At the same time, the gap between responsible innovation and extractive lending models is becoming clearer. CIM is positioned to support the next phase of responsible fintech growth by pairing disciplined capital structures with rigorous impact assessment. By helping proven lenders scale sustainably, CIM aims to extend access to well-designed credit products to millions more small businesses over time.
12
Sources Barkley, B. & Schweitzer, M. “The Rise of Fintech Lending to Small Businesses: Businesses’ Perspectives on Borrowing”. The International Journal of Central Banking. https://www.ijcb.org/sites/default/files/journal/v17n1/ijcb-v17n1-rise-fintech-lending-small-businessesbusinesses-perspectives-borrowing.pdf Curley, R., Poddar, B., Mayer, B., Johnson, Kyle., Arora, R., Ritchie, T., & Hecht, D. (2025). “The forthcoming revolution in small business lending”. BCG. https://media-publications.bcg.com/The-forthcoming-revolution-in-small-business-lending.pdf Federal Reserve Bank of Atlanta, “Report on Minority-Owned Firms,” Dec 2019. https://share.google/ZPYkQQCFzvo04XL9Z IFC (2025). “Which Firms Create More and Better Jobs?” https://www.ifc.org/content/dam/ifc/doc/2025/which-firms-create-more-and-better-jobs.pdf Intuit (2023). “The impact of late payments on businesses”. https://quickbooks.intuit.com/uk/blog/late-payments-impact-on-businesses/ Johnson, C., Manes, J., Martin, H., Misera, L., & Wiersch, A. “2025 Report on Employer Firms”. Federal Reserve Banks. https://www.fedsmallbusiness.org/reports/survey/2025/2025-report-on-employer-firms Main, Kelly (2026). “Top Small Business Statistics”. Forbes. https://www.forbes.com/advisor/business/small-business-statistics-feb-26/ Otar, Chad (2018). “What Percentage of Small Businesses Fail – And How Can You Avoid Being One Of Them?”. Forbes. https://www.forbes.com/councils/forbesfinancecouncil/2018/10/25/what-percentage-of-smallbusinesses-fail-and-how-can-you-avoid-being-one-of-them/ Pymnts (2024). “From Cash Flow Pain to Working Capital Gain”. https://www.pymnts.com/tracker_posts/from-cash-flow-pain-to-working-capital-gain-automated-arap-solutions-for-smbs/ Ramalho, R., Jiang, N., Koltko, O., Chávez, É., Koch-Saldarriaga, K. A., & Quesada Gamez, M. A. (2018). “Improving access to finance for SMES : opportunities through credit reporting, secured lending, and insolvency practices”. The World Bank. https://documents1.worldbank.org/curated/en/316871533711048308/pdf/129283- WP-PUBLICimproving-access-to-finance-for-SMEs.pdf US Bancorp (2023). “The Small Business Owner Perspective”. https://ir.usbank.com/news-events/news/news-details/2023/New-U.S.-Bank-report-reveals-smallbusiness-owners-are-feeling-successful-and-fulfilled-but-pursuing-their-dream-means-sacrifice-intheir-personal-lives-09-26-2023/default.aspx World Bank. “Small and Medium Enterprises Finance” https://www.worldbank.org/en/topic/smefinance Yahoo (2024). “Merchant Cash Advance Market Experiences Robust Growth”. Yahoo Finance. https://finance.yahoo.com/news/merchant-cash-advance-market-experiences-152600020.html?
13
Disclosure No Offer or Solicitation. The information in this document is for informational purposes only and is not an offer to
sell or the solicitation of any offer to buy securities. Any such offer will be made only through the offering materials for CIM’s Strategies, which will be available only to Qualified Purchasers. The statements in this presentation relating to CIM and the Strategies are qualified in their entirety by the disclosures in the offering materials.
Risks. An investment in CIM’s Strategies involves risks, which are disclosed in offering materials under “Risk
Factors.” Only by reading those offering materials carefully and discussing any questions you may have with CIM can you determine whether the investment’s risks and conflicts of interest are acceptable to you. The specific
investments included herein are not intended to indicate overall portfolio performance that may be expected to be achieved by the Strategies.
Source of Data / No Duty to Update. In this document, CIM refers to data reported by its portfolio companies,
which has not been reviewed or audited by an independent accountant or other independent testing firm. Neither
CIM nor any of its affiliates assumes any duty to update any information in this document for subsequent changes of any kind.