By Christopher Pitts
- CDFIs have approved more than $7 billion ($3.2 billion in Round 2) in PPP loans
- More than 40% of Black business owners reported they were not working in April, compared to only 17% of white small business owners
For the Black business community the pandemic struggle has never been so real, and an underlying reason is the inability to access debt in the time of need from mainstream banks. For this reason alone it’s commendable the latest stimulus bill included $12 billion towards Community Development Financial Institutions (CDFIs) during this time of crisis. Typically, CDFIs have a special interest in banking throughout minority communities, reviving struggling neighborhoods, increasing local economic activity with hopes of ultimately seeing the Black and brown entrepreneur thrive.
Why This Matters: The CDFIs importance comes into play as more and more minority businesses are seeking debt relief as a result of COVID-19. An overwhelming percentage of Black businesses only received a fraction of what they expected from debt relief during the first round of the Paycheck Protection Program. The new funding specifically lent by CDFIs is a move to make sure that PPP loans reach low-income communities where CDFIs operate.
CDFIs have a special interest in banking throughout minority communities and reviving struggling neighborhoods, increasing local economic activity
Since the pandemic started more than 40% of Black business owners reported they were not working in April, while only 17% of white small business owners said the same. So the need for CDFIs, non-profit corporations is desperately needed. They’ve been around since the 1970s and became federally mandated by the U.S. Department of Treasury under the Clinton Administration in the 1990s. Rooted in the social justice movements, CDFIs can take many forms such as community banks, credit unions, loan funds or venture capital funds.
Situational Awareness: Only about 200 CDFI credit unions, banks, or loan funds had the required SBA certifications to potentially access the PPP funds during the first round. Just 303 participating CDFIs, almost a third of the certified CDFIs in the country, made more than 100,000 PPP loans for a total of $7.4 billion.
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