WASHINGTON – Today, Representative Marcia Fudge (OH-11) led 27 of her colleagues in sending a letter to House leadership calling for the inclusion of a $10 billion set-aside for Community Development Financial Institutions (CDFIs) and other small Community Financial Institutions with assets of $1 billion or less within the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) in the next COVID-19 relief package.
CDFIs play a critical role in improving access to capital, expanding economic opportunity and building businesses in underserved communities. Unfortunately, CDFIs were left out of the small business relief provided through the PPP, the loan program created by the Coronavirus Aid, Relief, and Economic Security Act (H.R.748). However, the Paycheck Protection Program and Health Care Enhancement Act (H.R. 266), which refilled funding for the PPP, did include a set-aside for Community Financial Institutions with assets under $10 billion, including CDFIs, Minority Depository Institutions (MDIs), certified development companies, microloan intermediaries, and State or Federal Credit Unions. This is problematic for CDFIs as 97 percent of all banks fall under that threshold, resulting in a competition with thousands of other lenders to receive and distribute loans.
“By not including direct funding in the bill to both CDFIs and other small Community Financial Institutions, low-income individuals and minority and underserved small businesses, many of which have been the hardest hit by the pandemic, are prevented from accessing capital. Limiting access to capital will only exacerbate income disparities and the racial wealth gap during this crisis and beyond,” wrote the Members.
In order to ensure funding goes to small businesses most in need, the Members called for a $10 billion set-aside for CDFIs and other small Community Financial Institutions in the next COVID-19 relief package.
The Members noted the ask is not without precedent, pointing to the Great Recession, when “Congress invested $100 million in the CDFI Fund through the American Recovery and Reinvestment Act to enable CDFIs to make loans available to communities and small businesses. Similar support is needed to ensure all communities devastated by the pandemic have equal access to relief during and after the current public health and economic crises.”
The text of the letter can be found here.