WASHINGTON — The Small Business Administration is setting $10 billion in federal Paycheck Protection Program small-business loan funds aside for community development organizations as a way of ensuring federal coronavirus relief funds reach underserved communities.

The carve-out was requested earlier by congressional Democrats, who raised concerns minority-owned businesses, rural communities and others are not receiving an adequate share of federal coronavirus relief. The SBA’s inspector general has separately chided the agency for failing to collect demographic information that would show whether the loans are being distributed fairly.

The funding will be restricted to so-called community development financial organizations, known as CDFI’s, which are private banks that focus on low-income, low-wealth and other neglected businesses. The SBA also sees them as a vehicle to reach minority-owned businesses.

“CDFIs provide critically important capital and technical assistance to small businesses from rural, minority and other underserved communities, especially during this economically challenging time,” SBA administrator Jovita Carranza said in a news release.

Congressional Democrats called Wednesday’s announcement “a step forward” toward ensuring federal relief dollars reach the neediest communities. In a statement shortly after the SBA’s announcement, Senate Minority Leader Chuck Schumer, D-N.Y., applauded the decision to carve out funds, but also pressed the Treasury Department to do more. The SBA has so far held off on designating funds for Minority Depository Institutions, lenders that are specifically owned or controlled by minorities.

“I want to thank Secretary Mnuchin for heeding our calls to set aside a pool of funding specifically designated for lending by CDFIs, and now we’re urging him to move on and include Minority Depository Institutions as well since they, too, are critical to expanding access to communities of color,” Schumer said in a news release.


The Paycheck Protection Program is a $669 billion federal small-business loan effort that gives businesses forgivable, federally backed loans provided they keep paying employees. The loans are processed and disbursed by private banks, while the SBA and Treasury Department play a regulatory role.

The SBA has reported 4.4 million loans were processed through the program as of May 23, adding up to $511 billion spent so far.

Although the loans have reached millions of businesses, the program has been dogged by questions of fairness. In the initial $349 billion round of funding, large businesses and other well-financed organizations continually availed themselves of small-business loans, prompting the SBA to change its rules.

And the SBA’s inspector general concluded the SBA did not direct private lenders to prioritize minority- and female-owned businesses when they rushed to implement the program. The SBA’s failure to offer guidance to private lenders on the matter might have caused underserved communities to miss out on receiving a fair share of loans, the IG concluded.

The loan program still does not include any quotas or set-asides specifically for minority-owned lenders, although the SBA reports billions of dollars have flowed through those organizations anyway.

As of May 23, the SBA reported that minority-owned lenders had processed about 105,000 loans, adding up to approximately $10.1 billion, roughly 2% of the total Paycheck Protection Program funding. Community Development Financial Organizations have processed about $7.2 billion in PPP loans, according to the SBA.