While we have yet to realize the lasting economic impacts of COVID-19, the immediate impacts are unquestionably – and disproportionately – falling to communities of color. A sobering new report from the National Bureau of Economic Research found that from February to April, the number of Black and Latinx small business owners have fallen by 41% and 36%, respectively. Of the many factors causing this sharp decline, lack of access to credit is a significant obstacle to resiliency that continues to exist for small business owners of color, even long before the pandemic.
One organization at the center of this reality is Pacific Coast Regional, a 43-year old Community Development Financial Institution (CDFI) in Los Angeles that provides loans, educational and advisory services to predominantly small business owners of color. Seeing the impact on these businesses when COVID-19 hit, Pacific Coast Regional had to act, and act fast. With funding through Citi Foundation's initial COVID-19 emergency relief effort, Pacific Coast Regional expanded its capacity to serve 1,128 clients – a typical year's volume – in just 60 days. They hired additional business advisors and loan officers who helped facilitate $40 million in PPP loans for 201 businesses, the majority of which are owned by people of color.
This is the impact that mission-based institutions like Pacific Coast Regional make in its community, especially in times of crisis, and we want to expand that work.
In April, we announced plans to donate net profits from Citi's participation in the U.S. Small Business Administration's Paycheck Protection Program (PPP). We're proud to say that $25 million in initial proceeds from PPP has been donated to the Citi Foundation.
Today, the Citi Foundation is launching a new effort with a portion of those proceeds, deploying $15 million in unrestricted funding of up to $500,000 per CDFI to support small businesses owned by people of color and lower-income individuals and communities. This kind of flexible funding support can enable these trusted community institutions to provide businesses with the vital resources they need to sustain their operations and strengthen their businesses.
CDFIs interested in applying should visit http://www.citifoundation.com/cdfi. The application deadline is July 30, 2020 at 4:00pm ET.
The remaining $10 million in PPP net profits was deployed by the Citi Foundation to the Local Initiatives Support Corporation (LISC) to support the New York Forward Loan Fund, which is enabling CDFIs making loans to small businesses, nonprofits and small landlords for working capital, including payroll, operating and emergency maintenance.
These philanthropic efforts complement Citi's partnership with the National Banking Association, and the creation of a purchasing facility to assume up to $50 million in PPP loans from Minority Depository Institutions (MDIs).
The economic impacts of COVID-19 and longstanding racial inequity remind us that financial institutions of all sizes are needed to serve a broad spectrum of customer and client needs. We know that by partnering with local CDFIs and MDIs, together we can serve communities of color in larger and more effective ways than ever before. It is in these mission-based institutions where we will continue to invest.