June 15 (UPI) -- The Biden administration on Tuesday announced more than $1 billion in federal COVID-19 relief funds for hundreds of community development lenders in an effort to boost local economies and small businesses struggling amid the pandemic.
Vice President Kamala Harris in a Washington, D.C., press conference at the Eisenhower Executive Office Building with Treasury Secretary Janet Yellen by her side announced the Treasury had awarded the $1.25 billion to 863 community development financial institutions to provide capital to small businesses, particularly in underserved communities.
Harris told reporters that as the United States emerges from the coronavirus pandemic they can now see that the health crisis has exposed the flaws, fissures and failures of the U.S. economy while worsening inequalities in that system.
"And so when we took office, President Joe Biden and I knew that more than repair we must reimagine our economy," she said."Small businesses, of course, are at the center of this reimagining."
She said that small businesses are central to the future of the United States and they need more right now than relief -- they need capital.
The Treasury said in a statement that the grants will be made available through its CDFI Rapid Response Program to provide that capital for CDFIs to respond to the challenges communities, especially underserved communities, face due to the pandemic.
The grants, which are to be rapidly distributed, will be used to support financial products and services, development services and certain operational activities as well as allow the CDFIs to build capital reserves and loan-loss reserves, according to the Treasury.
By distribution, 339 organizations in major urban areas will receive $478.7 million, 277 in small urban areas will receive $414.2 million and 245 in rural areas will receive 353 million. Among the recipients include 58 organizations that are committed to invest in Native American, Native Alaskan and Native Hawaiian communities.
Nearly $600 million will go to loan funds with another $400 million to credit unions, the Treasury said, adding $267 million will be for banking entities and less than $10 million will be in venture capital funds.
Harris said traditional banks and lenders have not always seen or understood the vision of small businesses run by women and by people of color in low-income communities, but community lenders "were founded to see that vision."
"Community lenders understand the value of providing access to capital directly to communities and because they do they add value to those communities and by extension to our entire nation, which is why our administration is making a big investment in community lenders and actively working to increase community lending capacity," she said.
Yellen said that by serving areas that the financial sector has historically overlooked, the community development financial institutions lift up the entire economy, and Tuesday's announcement may lead to an additional $10 billion in investment as every dollar injected into these community lenders "catalyzes" eight more in the private sector.
"This is just the beginning," she said.