Two Paths in Small-Balance Lending: BayFirst Exits, FSWB Expands

August 12, 2025

Bob Coleman
Founder & Publisher

Two Paths in Small-Balance Lending: BayFirst Exits, FSWB Expands

In the wake of BayFirst’s decision to shutter its small-loan program and lay off 51 employees, the community banking sector has been reminded of the volatility, and opportunity, in niche lending markets. While some institutions are retreating from high-touch, small-balance lending due to cost pressures, risk concerns, and operational restructuring, others are leaning in with targeted programs designed to meet the needs of underserved communities. One such example is emerging from the Four Corners region, where First Southwest Bank is charting a different course — one that blends mission-driven lending with strategic partnerships to expand access to capital for Indigenous entrepreneurs.

First Southwest Bank Closes First NSBCI Loan: A Milestone in Indigenous Economic Empowerment

First Southwest Bank, a locally owned, independent community bank and Community Development Financial Institution, has closed the first loan under the Navajo Small Business Credit Initiative (NSBCI) in the United States. This loan supports Red House Law, a legal practice founded by Navajo attorney Alvina Earnhart, aiming to expand legal services on the Navajo Nation.

The NSBCI is a Navajo Nation program offering loans for Navajo small businesses across the United States, with the goal of promoting small business growth, increasing job opportunities, and supporting the Navajo economy. The program is part of the U.S. Treasury’s State Small Business Credit Initiative, which was expanded to include tribal governments and allocate $500 million for tribes to invest in small businesses owned by tribally enrolled citizens and nonprofits controlled by tribal members.

Change Labs, a Native-led organization rooted on the Navajo Nation, serves as a contracting entity that manages the NSBCI loan program and provides technical assistance to Navajo borrowers. In this first loan, Change Labs guaranteed 80% of a $50,000 loan to Red House Law from First Southwest Bank.

This milestone represents a significant step forward in expanding access to capital for Native entrepreneurs and supporting economic development within Indigenous communities across the Four Corners region. The collaborative model demonstrates how federal funding, tribal leadership, community-based organizations like Change Labs, and financial institutions like First Southwest Bank can work together to address historic gaps in access to capital for Native-owned businesses.

As the NSBCI continues to deploy funds, with Change Labs committed to deploying $6.65 million in loans over the next three years to Navajo-owned businesses, financial institutions have a unique opportunity to participate in transformative economic empowerment.