CDFI banks have been integral to distributing PPP lending to underserved communities. In order to do this, bank staff had to be nimble and take on new tasks with heavy workloads. CDFI banks were able to deliver a high volume of loans with a notable number of smaller loans. Below we offer two spotlights on CDFI banks doing this significant work.
One CDFI bank has been very involved in PPP lending over the past year with loans closed in FY2020 increasing by over $100MM from what they closed in FY2019 primarily due to the PPP Program. The CDFI had to pull in members of the team across the bank, including leadership, to underwrite and close the loans to ensure they could keep up with the demand. The income generated from this additional lending has been helpful as the bank increased their deferrals and reduced origination fees across their products to assist borrowers, resulting in less income from traditional sources.
The story was similar for another CDFI bank, where the PPP program required all hands on deck to meet demand. Bank staff who were not loan officers had to be trained quickly to step in to process loans. The majority of their PPP lending was to existing customers or businesses in their immediate service area because they were the only bank in their service area participating in the first PPP round. The typical borrower was self-employed and in the service industry with hairdressers and nail salons being the two most common business types. The CDFI bank ended up closing almost $30 million in PPP loans averaging $60,000 per loan with 12% of loans under $5,000.
Through this process CDFI Banks have recognized the strong commitment from their staff, have learned to work with increased efficiency to maximize impact, and have delivered on their commitment to increase access to the underserved.