Congress and COVID-19 Appropriations for CDFIs

Blog post author Bob Rapoza, CDFI Coalition Spokesperson

We’ve all seen the devastating impact the coronavirus has had on the economy and small businesses nationwide, but particularly in low-income and minority communities. The average small business only has enough cash to survive 27 days and this is impacting employees and communities that depend on these businesses for services.

Congress has been working diligently to pass legislation to ease this burden and assist people and communities impacted by the pandemic. However, federal relief is not making it to small firms without the relationships or resources to compete with larger businesses in communities with an abundance of conventional lenders. That’s where Community Development Financial Institutions can make a real different.

The HEROES Act passed by the House in May, proposes $1 billion in federal funds for Community Development Financial Institutions (CDFIs) – mission-driven lenders working with decades of experience serving the most difficult to reach communities. The request is modest relative to the size and scope of the CDFI industry.

Currently, there are 1,131 CDFIs that collectively total $211 billion in total assets with total outstanding portfolios of $158.7 billion. The $1 billion request represents a modest 0.47 percent of total CDFI industry assets.

In FY 2019, CDFI Fund Program award recipients made 772,348 loans to small businesses, micro-enterprises, and consumers totaling $21.5 billion. That impact can be multiplied four-fold if Congress provides $1 billion to the CDFI Fund.

In a recent Wall Street Journal article on the trials faced by small businesses in accessing the Paycheck Protection Program funds passed in the CARES Act in February, the Trump Administration pointed to CDFIs as the avenue to overcome this issue. This is a much welcomed acknowledgement of the important and vital work of CDFIs, after several White House budgets, including the FY 21, called to eliminate funding for CDFIs.

Year after year, Republicans and Democrats have come together to support CDFI Fund Programs, providing increases, which the CDFIs put to work by leveraging an additional $12 for every dollar in federal resources. This pandemic is not over and we need the expertise and services provided by CDFIs more than ever.

The Senate is expected to consider the legislation soon and we are hopeful they will continue the bipartisan record of supporting CDFIs. The CDFI Fund could award the money through a formula based on CDFIs’ track records. With authorization from Congress, the CDFI Fund could make grants to CDFIs to combat the impact of COVID 19.

This week, the CDFI community will be highlighting their work and discussing how $1 billion in funding would be used by CDFIs to assist rural and urban communities nationwide that have been negatively impacted by the pandemic. Stay tuned and follow our Week of Action by follow along and participate in this Week of Action on Facebook and Twitter, use # HEROESAct #CDFIsInvest #COVID19 #KeepCDFIsStrong.

Bob Rapoza is the spokesperson for the CDFI Coalition and Founder and President of Rapoza Associates.