The SBA Gives $6.8 Billion in PPP to Business Owners of Color
The Small Business Administration is giving additional PPP funds to Community Financial Development Institutions, which lend to small businesses in underserved communities.
On Thursday, the SBA announced it will be giving an another $6.8 billion in Paycheck Protection Program (PPP) funds to Community Development Financial Institutions (CDFIs). These nonprofit lending institutions are central to the effort to get relief loans to small businesses in underserved, low-income areas.
“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,” SBA administrator Jovita Carranza said in a press release. “CDFIs provide critically important capital and technical assistance to small businesses from rural, minority and other underserved communities, especially during this economically challenging time.”
As we reported earlier in the crisis, a number of pre-existing inequalities have made it much harder for minority-owned and immigrant-owned small businesses to access PPP loans, and early reports suggested that as many as 90 percent of women-owned and minority-owned businesses were not receiving assistance. Businesses apply for PPP through their banks, and banks were largely prioritizing “bigger” small businesses or clients who already had loans with them. Since minority-owned businesses tend to be smaller, and entrepreneurs of color have more trouble getting bank loans in the first place, many found themselves frozen out of the stimulus system.
CDFIs — of which there are about 2,000 nationwide — play a vital lending role in underserved communities of all kinds. 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’re able to direct funds quickly and efficiently in a crisis scenario.
The latest $6.8 billion is in addition to the $3.2 billion CDFIs received in late April, in the second round of stimulus funding. While the funds are better now than never, small business advocates in underserved communities say that CDFIs should have been included in the initial round of CARES Act funding. Because minority-owned businesses often operate on such small margins, these relief funds are likely reaching many entrepreneurs of color too late. Still, if you or a business owner you know is still struggling to access PPP loans, it’s definitely worth reaching out to a CDFI near you.