Supporting Israeli small businesses: Loan fund fuels survival amid economic strain - opinion

Rephael and his three sons are farmers in southern Israel, selling fruits and eggs in nearby communities. After October 7, his customers were evacuated. With his sons called up to the military, he could not plant and harvest his crops. Rephael relies upon a loan to sustain his business while waiting for his clients to return.

Near the Lebanon border, Rachel runs a coffee house employing eight part-time workers. While she waits for tourists to return, Rachel uses a loan to keep the café open for residents who did not evacuate and soldiers who are enjoying donated meals.

Rephael’s and Rachel’s businesses are two of more than 1,300 that have stayed open because of loans powered by the Jewish Federations Israel Emergency Loan Fund since its launch in March.

Jewish Federations of North America (JFNA) established the Loan Fund to help businesses survive the unparalleled economic strains from October 7 and its aftermath: the near-complete shutdown of economic activity in the Western Negev and across the northern confrontation line, the displacement of 140,000 residents from the South and North, the collapse of tourism, and the mobilization of nearly 300,000 reservists, which forces them, and often their spouses, out of the workforce for achingly long stretches of time.

The closing of a business has a deep emotional and material impact on its owners, employees and their families, and the community. As tens of thousands of businesses risked closure, the potential human and economic impact was unimaginable.

Addressing the needs of small businesses

Israel’s economy was not prepared to meet this unexpected crisis. Government programs left sizable gaps, and Israeli banks are typically reluctant to issue loans to small businesses. Enter the Loan Fund, which brings North American philanthropic dollars forward strategically to address the needs of a broad spectrum of small businesses across the Israeli economy.

Jewish Federations have raised $70.4 million for emergency loan funds, with $51.5 million allocated (or soon to be allocated) by the Loan Fund to five strategic partners who make and manage loans on Federations’ behalf and $18.9 million directly allocated by individual Federations and other funders to these loan platforms.

Allocations are made by a volunteer committee of financial executives led by Jeff Schoenfeld, partner at Brown Brothers Harriman & Co. and co-chair of Jewish Federations’ Israel Emergency Response Committee, together with Federation professionals led by Rebecca Caspi, senior vice president of Israel and Overseas at JFNA.

Each loan platform focuses on specific regions of Israel or sectors of Israel’s economy. Layered together and funded by Federations and their donors through the Loan Fund, the platforms deliver much-needed credit at scale across regions, sectors, and industries to the full diversity of Israel’s society and economy.

The Loan Fund offers additional security for loans to businesses that are struggling due to the conflict, which in turn enables some partners to secure vital leverage from banks to extend more loans Overall, this will allow for loans that are three to four times the amount of the fund’s allocations. The Loan Fund also enables the platforms to issue loans at lower interest rates by subsidizing costs.

The loan platforms have awarded loans of $75 million to over 1,300 businesses ranging from individual enterprises to small businesses. The total loans will grow to over $200 million once the funds raised are allocated and used by the platforms to issue loans. Loan amounts vary by platform and range on average from under $20,000 up to $100,000.

As we enter the second year after the horrors of October 7, the need for business loans is growing. Israeli businesses are confronting growing pressure and trying to hold on as the war with Hamas, Hezbollah, and Iran and its other proxies continues.

The Israeli economy faces deep challenges, with growth forecast to be close to zero in 2024, cuts to Israel’s credit rating, and increasing budget deficits.

Reservists – business owners, employees, their spouses, and customers – continue to be on duty or subject to ongoing deployments, an estimated 75,000 Israelis remain displaced from their homes, and areas of Israel face an ongoing complete shutdown or severe disruption of economic activity.

Small business owners take great risks when starting their businesses. They invest their time, money, passion, and hope into their ventures, which become their life’s work and the source of livelihood for their employees, along with offering vitality to their communities.

The loans provided through the Loan Fund are a lifeline for business owners to maintain their livelihoods and dreams – as well as those of their employees – during this challenging time. These funds to enable business owners to sustain themselves are what Maimonides recognized 850 years ago as the highest level of tzedakah (charity). 

In this second year of unparalleled crisis, Jewish Federations’ Loan Fund will continue to provide resources and solidarity to Rephael, Rachel, and others in Israel as they fight to maintain their livelihoods.

Evan Hochberg is associate vice president and deputy director, Israel and Overseas, at Jewish Federations of North America.

Matthew Salter is director, Israel Emergency Loan Fund, at Jewish Federations of North America.