Citigroup’s philanthropic arm is giving two Chicago-based lenders serving low-income communities $500,000 each from proceeds the bank collected through the federal Paycheck Protection Program.
The funds are part of a $15 million donation from Citi Foundation to 30 community-based lenders in 10 states and D.C., and are drawn from proceeds on the origination fees New York-based Citibank collected processing PPP loans to small businesses early in the pandemic.
The groups receiving the money are Community Development Financial Institutions, which provide financing and assistance to small businesses owned by people of color and nonprofits that aren’t always able to access capital from traditional banks.
The two Chicago-based recipients are IFF, which lends to nonprofits planning to build child care centers, clinics or schools in low-income communities, and Chicago Community Loan Fund, which provides loans to organizations focused on affordable housing, social services and economic development projects in underserved neighborhoods.
Launched in April, the PPP offered businesses with fewer than 500 workers forgivable loans of up to $10 million if 60% of those funds were used on payroll. But some smaller businesses, including those owned by immigrants and people of color, struggled to obtain the loans, and banks were criticized for allegedly prioritizing larger clients. The pandemic relief loan program has also been beset by allegations of fraud and abuse.
According to the Small Business Administration, lenders received fees of 5% on loans of up to $350,000, 3% on loans between $350,000 and $2 million, and 1% on loans of $2 million and more.
Joe Neri, CEO of IFF, said the funds from Citi Foundation will support the organization’s core operations, including its training and lending departments, which pivoted this year to help process PPP loans.
IFF processed 159 PPP loans for nonprofits worth about $23 million collectively across its seven offices in the Midwest, including Chicago, Detroit, and St. Louis.
“We diverted our entire lending team to that work,” Neri said. “It was a much needed pivot.”
Now that the federal loan program has ended, Neri said the funds will help IFF shift back to its original work, which includes helping nonprofits make changes to their facilities in light of the COVID-19 pandemic.
Chicago Community Loan Fund will use the funds in part to pay staff for work related to city, county and state loan and grant programs created to assist businesses during the coronavirus pandemic, said Juan Calixto, vice president of external relations. That includes Chicago’s Small Business Resiliency Fund, which provides low-interest loans of up to $50,000 for a five-year term.
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