Senate Bill Proposes a Set-Aside for Credit Unions to Issue SBA Loans
On April 17, 2020, the Senate passed amendments to the CARES Act . The bill will go before the House this week, where it is expected to pass. The Proposed Bill includes an increase in the funds available for loans under the Paycheck Protection Program. Specifically it outlines a set-aside for certain institutions:
Set-Aside for Certain Financial Institutions
The Proposed bill instructs the Small Business Administration to set aside, not less than $30 billion, so that certain (1) Community Financial Institutions, (2) Insured Depository Institutions and (3) Credit Unions may issue these loans:
NOTE: Community Financial Institutions can be on of the following:
Community Development Financial Institution (“CDFI”). The Bill uses the definition from the Riegle Community Development and Regulatory Improvement Act s an entity that: (1) Has the primary mission of promoting community development, (2) Serves an investment area or targeted population, (3) provides development services in conjunction with equity investments or loans, directly or through a subsidiary or affiliate, (4) maintains, through representation on its governing board or otherwise, accountability to residents of its investment area or targeted population, and (5) is not a state or federal agency. (NOTE: The definition also includes qualifications for holding companies to be deemed CDFI).
Minority Depository Institution (“MDI”). An MDI is a depository institution that:
If Privately owned, then 51% is owned by one or more socially and economically disadvantaged individuals.
If Publicly owned, then 51% of the stock is owned by one or more socially and economically disadvantaged individuals; and
If it is a Mutual Institution, then the majority of the Board of Directors, account holders, and community which it services must be predominantly minority.
(NOTE: “Minority” means black American, Native American, Hispanic American, or Asian American.)
Development Company (“DC). A DC is an enterprise incorporated under State Law with the authority to promote and assist the growth and development of small-business concerns in the areas covered by their operations.
Intermediary. The Bill utilizes the definition from Section 7(m)(11) of the Small Business Act, which includes among other things, private-non-profit entities.