CDFIs Can Make the SBA PPP Loan Program Work for Smaller, Minority-Owned, and Women-Owned, Small Businesses

As currently being implemented by the Small Business Administration (SBA), the loans made available through the $349 billion Paycheck Protection Program (PPP), part of the CARES Act recently enacted to address the COVID-19 crisis, are likely to significantly bypass smaller small businesses and those that are minority- or womenowned. The problem is that the SBA is running the program through banks that are existing SBA lenders, and many of these banks are choosing to serve only customers with existing business accounts and loans. This will exclude the many small businesses not currently served by SBA Lenders—disproportionately smaller, minority-owned, and women-owned businesses. Even if the SBA expands the program to include all federally insured depository institutions, most of these institutions are not well-positioned to serve this large group of firms that are critical to the American economy. An effective way to reach these businesses is to allow certified Community Development Financial Institutions (CDFIs) to disburse SBA PPP loans, and, going beyond PPP loans, to provide special funding that they can deploy to hard-hit communities through other loans and investments.