June 2, 2020
By Caity Witucki
Contributing Editor, Hot Topic Tuesday
Hot Topic Tuesday — SBA and Treasury Set Aside $10 Billion for CDFIs to Participate in PPP
Minority-owned small businesses were hit the hardest by the pandemic’s initial economic fallout. Early reports suggest that over 90% of minority and women-owned small businesses were not able to get a Paycheck Protection Program (PPP) loan before the first round of funding ran out on April 16th. In response, the SBA recently announced that it is setting aside $10 billion of round 2 funding to be lent exclusively by Community Development Financial Institutions (CDFIs).
“The forgivable loan program, PPP, is dedicated to providing emergency capital to sustain our nation’s small businesses, the drivers of our economy, and retain their employees,” says SBA Administrator Jovita Carranza. “CDFIs provide critically important capital and technical assistance to small businesses from rural, minority and other underserved communities, especially during this economically challenging time.”
“The PPP has helped over 50 million American workers stay connected to their jobs and over 4 million small businesses get much-needed relief,” adds Treasury Secretary Steven T. Mnuchin. “We have received bipartisan support for dedicating these funds for CDFIs to ensure that traditionally underserved communities have every opportunity to emerge from the pandemic stronger than before.”
CDFIs often provide translation and educational services for immigrant business owners and are more lenient about lack of capital, credit histories and criminal records. Because they are embedded in their communities, they are uniquely equipped to direct funds quickly and efficiently in a crisis scenario.
As of May 23, 2020, CDFIs had approved more than $7 billion ($3.2 billion in Round 2) in PPP loans. The additional $6.8 billion will ensure that entrepreneurs and small business owners in all communities have easy access to the financial system, and that they receive much-needed capital to maintain their workforces.