Paycheck Protection Program Reopens on Monday, January 11, 2021
SBA Releases Guidance to CDFIs on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns
January 11, 2021 will mark the reopening of the Paycheck Protection Program (PPP), first to CDFIs and then to other lenders two days later.
We recognize that the opening of the portal two days early is not sufficient to ensure that CDFI borrowers and other underserved businesses are adequately prioritized. This rushes an already frenetic pace. We have shared our concerns that more efforts be taken to enable credit unions to support their members through this process. We stand prepared to support you as you prepare to implement this next round of lending.
That said, we want to make sure you have all the information and materials to help you move forward in implementing PPP successfully. Please find this link to the SBA Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns for CDFIs. The brief seeks to address potential barriers of access to capital to the aforementioned communities.
The first round of the Paycheck Protection Program (PPP) left many minority businesses and small- and micro-enterprises struggling to access relief funds, as larger businesses and banks started at the front of the line. The aggressive advocacy of Inclusiv and its network and partners resulted in better access and broader engagement in subsequent funding rounds.
The SBA brief shares details from the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act (Economic Aid Act), which includes set-asides for new and smaller borrowers, borrowers in low- and moderate-income communities, and for community and smaller lenders. Set-asides include:
- $15 billion across first and second draw PPP loans for lending by community financial institutions;
- $15 billion across first and second draw PPP loans for lending by Insured Depository Institutions, Credit Unions, and Farm Credit System Institutions with consolidated assets of less than $10 billion;
- $35 billion for new first draw PPP borrowers;
- $15 billion and $25 billion for first draw and second draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans less than $250,000 to borrowers in low- or moderate-income neighborhoods. SBA has determined that at least 25 percent of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods.
To ensure access to the Economic Aid Act to minority, underserved, veteran, and women-owned businesses, the SBA is taking steps which include:
- Accepting PPP loan applications only from community financial institutions for at least the first two days when the PPP loan portal re-opens;
- Directing Lender Match borrower inquiries to small lenders who can aid traditionally underserved communities;
- Matching small businesses through Lender Match with Certified Development Companies (CDCs), Farm Credit System lenders, microloan intermediaries, and traditional smaller asset size lenders;
- Continuing to set aside dedicated hours to process and assist the smallest PPP lenders with their PPP loans
- And more (see document)
The SBA brief also provides suggestions for lenders to increase their efforts to assist eligible borrowers in underserved and disadvantaged communities.
- Interim Final Rule on Paycheck Protection Program as Amended by Economic Aid Act (Released 1/6/2021)
- Interim Final Rule on Second Draw Loans(Released 1/6/2021)
- FAQ for Lenders and Borrowers (12/9/2020)