U.S. Treasury Secretary Janet Yellen announced a new $ 9 billion initiative to expand government assistance to small businesses owned by minorities hard hit by the coronavirus pandemic.
Treasury Secretary Janet Yellen unveiled a new $ 9 billion initiative for lenders serving low-income communities, expanding government assistance to small businesses owned by minorities and ravaged by the pandemic.
The funds, which will be administered under the Emergency Investment Program, provide $ 2 billion for participants with less than $ 500 million in assets and an additional $ 2 billion for those with less than $ 2 billion. dollars in assets. The program will support loans, grants and forbearance.
The move is part of the Biden administration’s efforts to increase racial fairness and help underserved communities, and deploys funds authorized in a giant spending bill passed by Congress in December.
The new program will support “the deserts of financial services, places where it is very difficult for people to get their hands on capital to be able to do so,” Yellen said in a statement on Thursday.
Minority-owned US small businesses reported significantly weaker-than-average financial conditions, according to a February Federal Reserve survey. The survey found that 88% of companies surveyed with fewer than 500 employees said sales were still below pre-pandemic levels.
Almost a third of them said their chances of survival would be at least somewhat improbable without additional government help.
“The pandemic has made these deserts even more inhospitable,” Yellen said.
The agency opens a 60-day application window under the emergency investment program on Thursday and will begin underwriting loans in May, according to a treasury official who briefed reporters. The agency will release some details of the investments made after the loans are granted, an official said.
To encourage low-cost capital for the most struggling businesses in underserved communities, lenders will not have to pay dividends or interest to the treasury for the first two years, the ministry said.
Thanks to this program, the Treasury essentially takes a stake in financial institutions. Officials have worked with regulators to ensure investments are treated as equity, according to a Treasury official, to encourage financial institutions to increase the amount lent above $ 9 billion. The ministry sees loans tripling to $ 36 billion, an official said.
(Updates with details on how the program works in the last two paragraphs.)
– With the help of Christopher Condon.