When entrepreneur Amayah Harrison needed $15,000 to renovate and furnish her studio and event space in Sacramento, she initially approached traditional banks – but quickly found they simply don’t make the types of small-dollar loans that entrepreneurs need to get started. Then, a mentor told her about an alternative funding source: Working Solutions CDFI, a community development financial institution (CDFI) specializing in microloans and serving early-stage businesses. Through Working Solutions, she was able to receive the funding she needed to launch her business.

Amayah’s story is just one example of the many ways CDFIs build thriving communities by investing where other lenders do not. From supporting small businesses that can’t access bank loans to scaling affordable housing and financing essential community facilities for education and health care, CDFIs are a vibrant force making local economies stronger across America.

But the future of the CDFI sector is at risk. After months of canceling federal investments and slowwalking appropriated funds, the Trump administration has laid off all staff at the U.S. Treasury Department’s CDFI Fund, which has provided federal funding, oversight, and certification to CDFIs since its establishment in 1994. While bipartisan support for the CDFI Fund has reversed these layoffs, the Office of Management and Budget continues to withhold nearly $300 million in previously appropriated funding for CDFIs. The CDFI sector faces great uncertainty, but this much is clear: CDFIs can no longer reliably depend on the robust federal support they’ve received in the past.

Read more: The CDFI Fund Won Allies in Red States and Major Banks. Now It’s Counting on Them To Survive.

The implications of these cuts are profound. Federal CDFI Fund awards were delivered as net assets – unrestricted capital that went directly onto balance sheets, strengthening CDFIs’ financial foundations and enabling them to leverage up to $8 in additional private investment for every $1 in funding from the U.S. Treasury. Without this equity flowing to their balance sheets, the financial position of CDFIs will change.

But the need for CDFIs – and their proven capacity for impact – is perhaps greater than anytime since the pandemic.

To preserve the sector, funders cannot continue with business as usual. Many philanthropic funders have primarily supported CDFIs through program-related investments and other forms of debt capital. This approach made sense when federal equity was reliably flowing to CDFI balance sheets. But that landscape has fundamentally shifted. Funders who have provided loans must expand their practices to intentionally focus on building net assets on CDFIs’ balance sheets as well.

The shift isn’t simply about replacing federal dollars or attempting to fill the gap left by federal abdication. It’s about replacing the specific type of capital (equity) those dollars provided. Providing solely debt (a loan) without the appropriate level of accompanying net assets (a grant) does not create long-term financial sustainability. This is the critical role the Treasury program provides: injecting equity onto CDFI balance sheets to attract private capital debt.

For funders who are looking to support CDFIs at this moment, there are three simple actions to consider. With this shift in strategy, philanthropy can soften the blow of federal cuts and create a more resilient community lending sector – sustaining impact in the absence of federal support.

Give enterprise capital: an injection to the balance sheet

Net assets – a CDFI’s total assets minus liabilities – are essential to their financial health and ability to attract additional investments. CDFIs must maintain a minimum debt-to-equity ratio, which means as they add more debt they must add more equity. A CDFI with a strong balance sheet is better able to acquire debt-financing and lend more dollars to communities.

Net assets also enable CDFIs to invest in critical systems and staff, ensuring they have the capacity to underwrite and service loans and provide personalized support to their borrowers. Further, a strong balance sheet ensures CDFIs are ready and able to provide financial services to overlooked and under-resourced communities.

To shore up CDFIs’ net assets, the best solution is for funders to provide enterprise capital: unrestricted, multi-year funding. Enterprise capital strengthens the balance sheet, ensuring CDFIs have sufficient assets to service debt and support business continuity. For instance, the Robert Wood Johnson Foundation provides net asset grants with most of its program-related investments, a practice that should be emulated by more funders to strengthen the CDFI sector.

Pair debt-relief and general operating support

If funders are not ready to provide enterprise capital, they can still provide immediate relief to CDFIs through debt forgiveness or restructuring of existing program-related investments. Forgiving or restructuring these loans provides a pathway for CDFIs to continue serving clients without having to make counterproductive decisions about operations and personnel. Giving general operating support is another option, which provides revenue that CDFIs can use to cover salaries and day-to-day operations, ensuring CDFIs do not have to draw from unrestricted net assets just to break even.

Many CDFIs are facing liquidity constraints as the federal funding that was reliable for decades now fails to materialize. Debt relief and general operating support address this immediate crisis.

Listen closely to CDFI partners’ actual needs

Too often in philanthropy, grantees are not empowered to ask for what they need, and instead ask for what they think they can get. Now is the time for foundations to engage CDFIs in genuine conversations about their financial constraints and requirements.

For instance: What does your balance sheet actually need right now? Would debt relief be more valuable than new capital? What infrastructure investments would strengthen your resilience? How can we structure our support to best match your financial reality?

It is equally important for funders to inquire about non-financial support, such as introductions and references to other funders, technical assistance, and in-kind marketing support. Needs will vary by organization, but asking these questions and offering non-financial support signals something vital: that philanthropy views CDFIs as true partners and is willing to adapt its approach to meet their needs.

What future will philanthropy create?

The formula that powered three decades of community development impact can survive this interruption. But only if philanthropy adapts its approach now to help CDFIs navigate the new capital environment they face today.

For funders committed to economic justice and community development, the path forward is clear: Expand your strategy to include equity. Provide enterprise capital to build balance sheet strength. Consider debt relief for existing obligations. And above all, listen to what your CDFI partners actually need to fulfill their missions sustainably.

The question isn’t about the need for CDFIs or whether the sector can survive, but whether philanthropy will provide the type of capital that makes survival possible. With the right support and capitalization, CDFIs can continue driving powerful economic and community impact for decades to come – despite federal uncertainty.

This post was originally published on Next City.