Congressional Hispanic Caucus Chair Castro Calls for $130 billion to Support Underserved Small Businesses, Mandatory Accountability Requirements

WASHINGTON—Congressional Hispanic Caucus (CHC) Chairman Joaquin Castro (TX-20) is calling for improvements to the Small Business Administration Paycheck Protection Program and additional funding for Economic Injury Disaster Loans and grants to ensure capital actually reaches main street business most in need. In a letter to Secretary Mnuchin and Administrator Carranza, Chairman Castro urges them to set aside at least $65 billion to be channeled through Community Development Financial Institutions (CDFI), at least $50 billion in Economic Injury Disaster Loans, $15 billion in disaster grants, and institute mandatory reporting requirements. The request is for a total of at least $130 billion to support unserved businesses with stronger accountability and transparency measures.

"It is essential that upcoming legislation automatically authorize certified CDFIs as lenders for PPP and include a set aside of at least $65 billion to be channeled through these CDFIs," Chairman Castro wrote. "These institutions play a leading role in serving farmers, as well as veteran, family, women, and minority-owned small businesses in rural, urban and suburban communities."

"Given the demand and limitations with PPP, we anticipate that at least $50 billion in Economic Injury Disaster Loans and $15 billion in disaster grants are needed," the Chairman added. "Mandatory reporting requirements will provide much-needed transparency, inform if loan adjustments need to be made, and strengthen accountability."

Full text of the letter follows and can be found here.

Dear Secretary Mnuchin and Administrator Carranza,

The Congressional Hispanic Caucus (CHC) underscores the importance of a supplemental appropriations for the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP) with essential changes to PPP to improve its reach and impact on minority-owned businesses and underserved communities. Problems with PPP have prevented many small businesses across the country from accessing the financial help they need. Yesterday, the Small Business Administration (SBA) announced that it has exhausted the $349 billion allocated to PPP,[1] and that nearly four million businesses have applied for EIDL funding for a total of $383 billion, although Congress allocated just $17 billion for the program. [2] Therefore, forthcoming legislation should appropriate additional funding to PPP and include provisions that will ensure that substantial funding is channeled through community development financial institutions (CDFIs), mandate reporting requirements for disbursements, and provide additional funding for EIDL loans and grants. These actions will help ensure that vulnerable job-creating businesses can access necessary aid and are not left behind by recovery efforts.

It is essential that upcoming legislation automatically authorize certified CDFIs as lenders for PPP and include a set aside of at least $65 billion to be channeled through these CDFIs. These institutions play a leading role in serving farmers, as well as veteran, family, women, and minority-owned small businesses in rural, urban and suburban communities. Latino businesses commonly bank with smaller financial institutions versus larger banks who are prioritizing businesses that already bank with them.[3] The government should empower micro lenders, small community banks, and credit unions that reach these small businesses in our communities, which will result in a more holistic recovery. To remedy the urgent problem that many small businesses are being left behind, future legislation should automatically authorize CDFIs as lenders for PPP and set-aside significant funding to be channeled through CDFI lenders. Moreover, disbursements under PPP should be transparent so we do not have to rely on anecdotal evidence and ensure that small business relief is benefiting all communities, including Hispanic communities. Therefore, mandatory reporting requirements that track which businesses are receiving aid and how much they are receiving must be included in legislation. Mandatory reporting requirements will provide much-needed transparency, inform if loan adjustments need to be made, and strengthen accountability.

Furthermore, there must be a significant increase in funding to disaster loans and grants to satisfy the hundreds of billions in oversubscribed demand. Businesses that are unable to benefit from PPP are turning to disaster loans and grants to help bridge them through the pandemic. This includes nonprofits, small businesses that do not traditionally engage with commercial lenders, and many institutions of higher learning like Hispanic-Serving Institutions, that are in a life-or-death fight for funding. This investment will yield a high return as only about half of the 4.5 million Latino-owned businesses have a relationship with a bank.[4] Given the demand and limitations with PPP, we anticipate that at least $50 billion in Economic Injury Disaster Loans and $15 billion in disaster grants are needed. The federal government should prioritize EIDL and grants as we work to support small businesses across the country.

As we face the prospect that Coronavirus could obliterate Hispanic wealth, which was already crippled by the Great Recession, and that the pandemic continues to threaten the 4.5 million Latino-owned businesses that have about 2.3 million employees on payroll, it is essential that federal aid reach these communities.[5] Allocating additional funding for PPP and EIDL loans and grants, closing the existing gaps of inequity in accessing relief, and increasing transparency will help enable a stronger and faster recovery for our country.

If you have any questions, please reach out to Congressional Hispanic Caucus Executive Director, Alma Acosta atalma.acosta@mail.house.gov.

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The Congressional Hispanic Caucus (CHC), founded in December 1976, is organized as a Congressional Member organization, governed under the Rules of the U.S. House of Representatives. The CHC is dedicated to voicing and advancing, through the legislative process, issues affecting Hispanics in the United States, Puerto Rico and U.S. Territories.