HF 266 that was passed last week, sponsored by Congresswoman Betty McCollum allocated $30 billion dollars to flow through community lenders, including, Community Development Financial Institutions (CDFIs) with the intent that they will serve minority and other small Mom and Pop stores left out of the first round of SBA Funding. Senate Majority Leader Mitch McConnell and Senator Chuck Schumer both on the floor of the Senate emphasized the intent of this dedicated funding stream.
The form that the SBA has set up for CDFIs to register at this link however specifies that they should have lent out $50 million in the last 12 months. There are not many CDFIs in the country that are that big. So in essence the SBA has interpreted the law in a different way as specified by Congress and will result in the small Mom and Pop stores in minority and low income communities not accessing this important lifeline.
HF 266 very clearly defines a CDFI (as articulated in the Riegle Community Development and Regulatory Act of 1994, see below). Note – a $ amount of lending does not define a CDFI in the existing law. From the definition you will also see the role that the CDFI plays to bring access to capital to underrepresented communities.
The SBA national office has been made aware of this last week and still as of 1:45 pm Central Time, Sunday April 26, no changes have been made.
The portal is going live on Monday and the well connected have already their loans in place with their favorite lenders and the money will be gone.
In Minnesota, for example, we have some very active CDFIs serving minority and immigrant communities. They will not have the resources to provide to the Mom and Pop stores in their areas.
The SBA should offer immediately a special pathway for small CDFIs to access these funds and not release any funding for another 24 hours so that the smaller CDFIs have a chance to register as lenders to ensure fair allocation of resources.