Van Hollen Urges Increase in CDFI Fund to Support Local Communities in COVID-19 Response
CDFI Loans Provide Immediate Relief to Local Small Businesses, Non-Profits, and Community Development Projects
Today, U.S. Senator Chris Van Hollen (D-Md.) urged Senate Majority Leader Mitch McConnell and Minority Leader Chuck Schumer to increase funding for the Community Development Financial Institutions (CDFI) Fund within the phase three coronavirus package. The CDFI Fund provides financial and technical assistance grants to local financial institutions that are mission-focused and often provide financing to small businesses, non- profits, affordable housing, and community development projects in underserved communities. Maryland is home to 17 CDFIs, and the state received over $2.6 million in funding in Fiscal Year 2019 alone. For every dollar awarded, CDFIs leverage an average of $10 dollars of private investment.
Senator Van Hollen writes, “I request a funding allocation of at least $550 million for the CDFI Fund in the upcoming COVID-19 stimulus package. CDFIs have the organizational tools and resources needed to immediately provide debt relief, working capital, and consumer loans to their borrowers.”
“CDFIs finance small businesses, affordable housing, non-profits, and community development projects which address the needs of low-income Americans and their communities,” he continued. “Many CDFI borrowers are experiencing a multitude of challenges due to the coronavirus crisis. For example, CDFIs are reporting that small-business and non-profit borrowers are struggling to repay debt as businesses are ordered to be shut down, and affordable housing developers are experiencing delays and stops in construction.”
As a result of lockdowns in place alongside strict guidance from the Centers for Disease Control and Prevention to limit social contact, small businesses across America have suffered plummeting revenues. Some have been forced to lay off staff or close indefinitely. Senator Van Hollen heard directly from leaders in Maryland’s small business community this week and has acted quickly to urge McConnell and Schumer to address these concerns within the next COVID-19 response package. Van Hollen’s proposal to increase the CDFI fund by at least $550 million would also waive certain program requirements – making it easier for small businesses to receive funds as soon as possible – and eliminate interest rates on the existing Financial Assistance Direct Loan program.
“As we work to help our nation weather this public health and economic emergency, I urge you to consider this proposal,” Senator Van Hollen concluded.
The full letter is available here and below.
Dear Leader McConnell and Leader Schumer:
I request a funding allocation of at least $550 million for the CDFI Fund in the upcoming COVID-19 stimulus package. CDFIs have the organizational tools and resources needed to immediately provide debt relief, working capital, and consumer loans to their borrowers.
CDFIs finance small businesses, affordable housing, non-profits, and community development projects which address the needs of low-income Americans and their communities. Many CDFI borrowers are experiencing a multitude of challenges due to the Coronavirus crisis. For example, CDFIs are reporting that small-business and non-profit borrowers are struggling to repay debt as businesses are ordered to be shut down, and affordable housing developers are experiencing delays and stops in construction.
I also propose that certain program requirements be waived in order to expedite the distribution of funds so that those in desperate need receive money as quickly as possible. This would include waiving matching fund requirements and award caps that in normal times would otherwise apply to CDFI Program dollars. You may recall that such waivers were provided alongside additional CDFI Program appropriations as part of the American Recovery and Reinvestment Act in 2009. Additionally, it is important that these dollars be distributed through a streamlined application process allowing the dollars to get to businesses and organizations in need as quickly as possible.
Congress should also waive interest rates on the existing Financial Assistance Direct Loan program so that CDFIs can access credit from the U.S. Department of the Treasury’s CDFI Fund to meet the cash-flow needs of impacted borrowers and communities. The Direct Loan program would support zero-interest loans from the CDFI Fund to certified CDFIs which then would re-lend the dollars to impacted borrowers and entities needing assistance. This would provide CDFI borrowers cash-flow resources to weather the current public-health and economic crisis. As with the additional CDFI Fund Program appropriations, these loan dollars should also be exempted from matching funds requirements and award caps. Further the CDFIs who use these funds to provide loans to impacted businesses and organizations should be required to limit interest rates they charge to no greater than 2.5%.
As we work to help our nation weather this public health and economic emergency, I urge you to consider this proposal.
Sincerely,
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