Community Development Financial Institutions (CDFIs) are hoping more Paycheck Protection Program (PPP) funding is passed by Congress soon so that smaller businesses left behind can stay afloat during the coronavirus pandemic, according to a Tuesday (April 14) report in the Wall Street Journal.
CDFIs — which exist in all 50 states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands — offer loan money in times of disaster to businesses that typically can’t get funding from banks. CDFIs focus on serving the needs of the poor and working-class in urban and rural communities and are typically controlled locally.
Many CDFIs were not able to be up and running in time to take advantage of PPP loans, and the $349 billion in emergency loan funding — part of the $2.2 trillion coronavirus relief package passed by Congress last month — is expected to be depleted by Friday (April 17).
Democrats in Congress are looking to address that issue by setting aside about 50 percent of proposed additional PPP funding to help CDFIs, credit unions and community banks.
“We didn’t get started as quickly as the others did, so we’re worried that by the time our program gets in place, that all of the funds for PPP would have been allocated,” said Matthew Raker, executive director of Mountain BizWorks, a nonprofit loan fund.
Many of the 350 businesses served by Mountain BizWorks are headed by women and minorities or are based in low-income, rural areas.
Ruben Alonso, president of the CDFI loan fund AltCap in Kansas City, Mo., said AltCap wanted to participate in PPP but didn’t think it could meet eligibility requirements. The fund separately raised $5 million for relief loans in its community. Minority and low-income businesses make up 60 percent of the loans AltCap extends, he said.
Credit unions were also left out of initial applications because they could not activate the correct Small Business Administration credentials quickly enough, Carrie Hunt, executive vice president of government affairs at the National Association of Federally-Insured Credit Unions, told the WSJ.
She said that any funding allocated for community FIs equals “an extra layer of protection so we don’t have anyone that is left behind.”
Sen. Marco Rubio (R-Fla), chair of the Senate committee on small business and entrepreneurship, said he supports advancing the present bill and encouraging more community lenders to take part through other means.
“This can be done by regulations from Treasury and the SBA,” Rubio said last week.
Democrats, however, feel strongly that community and nonbank lenders take care of the smaller businesses that are most at risk of folding and are largely disregarded by bigger banks.
The PPP is designed to offer loans backed by the federal government to small and medium-sized businesses (SMBs) with up to 500 employees. Those loans are forgivable if used primarily for payroll over the course of eight weeks.
That'd help a lot of businesses, but even the PPP seems unlikely to keep many of them afloat. A new PYMNTS survey of some 700 SMBs found that they expect to run out of money 113 days on average before they think the coronavirus crisis will end. That's some 53 days longer than the PPP aid that the government is offering. For more survey results, click here.