WASHINGTON, D.C. – U.S. Sen. Sherrod Brown (D-OH), Ranking Member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs today joined seven of his colleagues on a letter to Federal Reserve Chairman Jerome Powell to highlight the need to open the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPP Facility”) to nonbank community financial institutions, including all certified community development financial institutions (CDFIs). The Fed’s PPP Facility provides financial backing to lenders of the Small Business Administration’s (SBA) Paycheck Protection Program (PPP), a new federal program under the CARES Act that provides forgivable loans based on employee retention to small businesses nationwide. Currently, only depository institutions that originate PPP loans are eligible to borrow under the PPP Facility. The Fed recently indicated it is working to expand eligibility to participate in its PPP Facility to non-depository institutions in the future, which would include CDFIs, but these financial institutions need access immediately. The letter was also signed by Senators Chris Coons (D-DE), Michael Bennett (D-CO.), Cory Booker (D-NJ), Catherine Cortez Masto (D-NV), Edward Markey (D-MA), Mazie Hirono (D-HI), and Jackie Rosen (D-NV).

“We understand the Federal Reserve is working to expand eligibility to the PPP [Liquidity] Facility, and we urge the Federal Reserve to make the PPP Facility available to nonbank community financial institution lenders, including certified Community Development Financial Institutions (CDFIs), so that underserved businesses can get access to this critical capital,” the senators write. “We are concerned that the most at-risk businesses—smaller businesses, minority- and women-owned businesses, and businesses located in low-income communities—will not have access to the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) loans.”

The senators conclude, “We request that the Federal Reserve move quickly to open the PPP Facility to nonbank community financial institutions, including all certified CDFIs, and provide immediate access to all licensed SBA 7(a) lenders that are CDFIs or subsidiaries of CDFIs to the Facility.”

The full text of the letter is available here and below.

Dear Chairman Powell:

We appreciate the efforts the Federal Reserve is taking to support economic recovery in response to the COVID-19 crisis.  We are writing today about the Paycheck Protection Program Liquidity Facility (“PPP Facility”).  We understand the Federal Reserve is working to expand eligibility to the PPP Facility, and we urge the Federal Reserve to make the PPP Facility available to nonbank community financial institution lenders, including certified Community Development Financial Institutions (CDFIs), so that underserved businesses can get access to this critical capital.  

We are concerned that the most at-risk businesses—smaller businesses, minority- and women-owned businesses, and businesses located in low-income communities—will not have access to the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) loans.  One effective way to reach these vulnerable businesses is through the nation’s network of CDFIs—banks, credit unions, and nonprofit loan funds certified by the U.S. Department of the Treasury as having a primary mission of providing credit and capital to distressed communities and underserved borrowers.  

There are more than 1,100 certified CDFIs throughout the country, the majority of which are nonprofit nonbank loan funds—including approximately 80 loan funds that already have SBA 7(a) licenses and many more that have extensive small business lending experience.  However, none of these CDFI loan funds can access the PPP Facility because it is currently only open to insured depository institutions.  

Because CDFIs lack the liquidity of large banks, it is important to provide access for nonbank CDFIs to the PPP Facility so that these lenders can provide loans to underserved businesses.  The Federal Reserve’s term sheet for the PPP Facility indicates that it may consider expanding eligibility to nonbank lenders “in the near future,” and a recent press release stated the Federal Reserve is working to expand access to the Facility to additional SBA-qualified lenders as soon as possible.  

We request that the Federal Reserve move quickly to open the PPP Facility to nonbank community financial institutions, including all certified CDFIs, and provide immediate access to all licensed SBA 7(a) lenders that are CDFIs or subsidiaries of CDFIs to the Facility.  These entities have a proven track record of SBA lending and of working with disadvantaged borrowers.  Providing them with access to the PPP Facility will help ensure that our nation’s most vulnerable businesses will get access to needed capital.

Thank you for your consideration of this important matter.

Sincerely,

 

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