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Community Developments Investments (April 2022)

Banks Address Challenges to Small Business Recovery From the Pandemic

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Hershel Lipow, Community Relations Expert, OCC

Banks Address Social and Economic Challenges of Recovering From the Pandemic
Banks Address Social and Economic Challenges of Recovering From the Pandemic
With the help of recovery programs, financial institutions have leveraged their expertise and capital to help individuals, small businesses (as shown in photo at top), and community organizations meet their financial obligations during the COVID-19 pandemic. Communities have created public-private partnerships to provide low-interest loans and other post-disaster assistance. Banks are a critical source of financing to bridge immediate recovery needs of small businesses and longer-term rebuilding of commercial areas such as the Phoenix, Ariz., shopping center shown in photo at bottom. (Stock photos

Throughout the COVID-19 pandemic, banks played important roles in addressing the challenges experienced by small businesses and reaching out to underserved markets. Banks leveraged their expertise and capital to help small businesses by partnering with community development financial institutions (CDFI), minority depository institutions (MDI), and other community organizations with deep roots in the minority and low-income communities they serve. Banks stepped up to help their business customers, make investments, and originate many of the loans offered by the U.S. Small Business Administration's (SBA) Paycheck Protection Program (PPP) and other federal recovery programs.

In 2021 banks were the biggest PPP lenders, accounting for 3.6 million loans to businesses affected by the pandemic.1 These loans covered costs related to payroll and certain other expenses incurred by these distressed businesses.

In December 2020 Congress appropriated $12 billion to provide low-cost, long-term capital investments to CDFIs and MDIs in recognition of their unique relationships with minority-owned small businesses and in an effort to support small businesses' access to financing faster and more effectively.2

Support for Minority Depository Institutions

Minority-owned banks know and understand the communities they serve and are able to provide customized products and services to their customers. Although relatively small in number and assets, MDIs make a greater percentage of their new mortgages and small business loans to minority borrowers than other financial institutions.3 MDIs play a crucial role, serving as safe, accessible banking options for their customers to access credit, capital, and financial services.

OCC-supervised banks have supported MDIs through the OCC's Project REACh initiative (Roundtable for Economic Access and Change). Project REACh brings together leaders from civil rights organizations and the banking, business, and technology industries to reduce barriers that prevent full, equal, and fair participation in the nation's economy. One of the project's four goals is to revitalize MDIs by providing technical assistance, encouraging large banks to invest in MDIs, and developing partnerships and collaborations for MDIs. Since its inception, Project REACh has secured nearly $500 million in investments committed to MDIs. Additionally, through Project REACh over 20 banks have signed the MDI pledge to strengthen MDIs through investment, technical assistance, business opportunities, executive training, and more.

Community Development Financial Institutions Serving Small Businesses

In addition to supporting MDIs, numerous banks have developed and expanded their partnerships with nonprofit CDFIs to reach small and minority businesses and entrepreneurs. As mission-driven financial institutions, CDFIs serve as catalysts for economic growth and revitalization of economically distressed and underserved communities. They are committed to helping these communities overcome the difficulties and challenges so they can thrive.

During the pandemic, CDFIs were on the frontlines providing technical assistance and financing for small businesses and microenterprises, commercial real estate, affordable housing, and other community development projects. For example, nonbank CDFI funds made more than 276,000 loans totaling more than $5 billion with an average loan amount of $18,268,4 which was less than the average amount for all PPP loans of $41,559. More than 300 CDFIs participated in the PPP.5

The Massachusetts-based CDFI Interise demonstrates how banks have provided critical resources to CDFIs and attempted to close the income inequality gap and barriers encountered by underserved, minority-, veteran-, and women-owned businesses during the pandemic. Interise partners with banks to work with its network of 8,000 small business owners and to provide resources to help the businesses grow and succeed. Its COVID-19 Resource Center and online program provides training and opportunities to small businesses that are in low-income communities or are minority-owned. The business owners share successes and challenges, and they access resources for continued learning and leadership development. A Wells Fargo grant, which helped the online program get started, supports the Interise technology and instruction infrastructure. Other contributions came from Citibank, Citizens Bank, Santander Bank, and TD Bank's TD Charitable Foundation.

Wells Fargo created its Open for Business Fund to engage nonprofit community lenders and capitalize CDFIs. The fund provides capital and technical support with an emphasis on minority-owned businesses. As part of the company's Diverse Community Capital Program, the Wells Fargo Foundation joined the small business lender LiftFund and the National Association of Latino Community Asset Builders (NALCAB) to start Acceso to support growth-oriented lending to minority-owned businesses nationwide through a network of Hispanic-led nonprofit business lenders. Acceso, which provides small business loans from $50,000 to $500,000, is designed to help diverse entrepreneurs expand their revenue, provide jobs, and improve the economy.

Banks have contributed to other CDFI pandemic-related initiatives, often through their own affiliates and corporate foundations. For example, U.S. Bancorp Community Development Corporation provided grants to more than a dozen Black-led CDFIs, and the U.S. Bank Foundation provided a grant to help the African American Alliance of CDFI CEOs serve as an industry voice.

Many other banks have contributed to CDFI-led small business recovery programs:

  • Raymond James Bank made an equity investment in the Tampa Bay Black Business Investment Corporation, a CDFI that provides microloans to pandemic-affected small businesses in the Tampa Bay area. Other partners in the CFDI include Bank of America, Fifth Third Bank, and Wells Fargo.
  • Fifth Third Bank and other banks helped establish the Chicago Small Business Resiliency Fund to provide small businesses and nonprofit organizations with emergency cash flow. Funds are provided to eligible businesses as low-interest loans through lending partners, including Accion Chicago, a CDFI that is part of the Accion US Network.
  • PNC Bank provided bridge capital to help AltCap, a CDFI and approved PPP lender in the Kansas City metro area, meet its commitment to increase access to PPP funding for local small and minority-owned businesses. The capital funding is part of the bank's commitment to help eight CDFIs throughout the country issue PPP loans.

For further information, contact Hershel Lipow at Hershel.Lipow@occ.treas.gov.

1 For example, refer to U.S. Small Business Administration (SBA), “Paycheck Protection (PPP) Program: Approvals through 5/31/21,” p. 4.

2 The measure included $12 billion in supplemental appropriations to provide low-cost, long-term capital investments to MDIs and CDFIs that are depository institutions through the new Emergency Capital Investment Program administered by the Treasury Department and $3 billion for the CDFI Fund to provide emergency support to CDFIs through two direct grant programs.

3 Refer to Federal Deposit Insurance Corporation, 2019 Minority Depository Institutions: Structure, Performance, and Social Impact.

4 Refer to SBA, “Paycheck Protection (PPP) Program: Approvals through 5/31/21,” p. 4.

5 Refer to U.S. Department of the Treasury, Community Development Financial Institutions Fund, “Update From CDFI Fund Director Jodie Harris,” December 9, 2020.

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This publication is part of:

Collection: Community Developments Investments

Community Developments Investments April 2022 

  • Deputy Comptroller
  • Barry Wides
  • Editorial Staff
  • Karen Bellesi
  • David Black
  • Michael Carrier
  • Janet Fix
  • Hershel Lipow
  • Design Staff
  • Svetlana Bilenkina
On the Cover

Banks are partnering with community financial institutions and other local organizations to help communities across the nation recover from flooding, fires, other natural disasters, and the COVID-19 pandemic. Stock photos.

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Call (202) 649-6420 or email communityaffairs@occ.treas.gov. This and previous editions are available on the OCC's website at www.occ.gov/communityaffairs.

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Articles by non-OCC authors represent the authors’ own views and not necessarily the views of the OCC.

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