The COVID-19 pandemic has devastated the economic prospects of people and businesses in the US (and around the globe). Tragically, this devastation continues to be especially acute in communities which have been neglected and underserved by capital for generations. In order to address this economic pain, the spending bill enacted into law in December 2022 established the development of the Emergency Capital Investment Program, or ECIP. The program was officially launched by the US Department of the Treasury on March 4, 2022.
Through the ECIP, up to $9 billion will be sent straight to Community Development Banking institutions (CDFIs) and minority depository institutions (MDIs) so these institutions can offer funding and relief to communities in america which have suffered the most from the results of the pandemic and from decades of economic neglect.
We understand that we’ve just thrown some obscure acronyms at you, so with this article, we’re going to cut with the bureaucratic lingo and explain just how this new federal investment program stands to profit the most economically vulnerable businesses and consumers in america.
In doing this, we’ll explain precisely what CDFIs and MDIs are so you’ll know where to look for financial relief.
What Is The Emergency Capital Investment Program (ECIP)?
The ECIP directs as much as $9 billion to CDFIs and MDIs. After that, this funding will be used to provide loans, grants, and forbearance for small , minority businesses and consumers in low-income communities. The ECIP sets aside $2 billion for participants with under $500 million in assets as well as an additional $2 billion for participants with under $2 billion in assets.
In a current press release, Treasury Secretary Janet Yellin said the next about this new program:
“America has always had financial services deserts, places where it’s very difficult for people to get their hands on capital so they can, for example, start a business. But the pandemic makes these deserts much more inhospitable . . . The Emergency Capital Investment Program can help these locations that the financial sector hasn’t typically served well. It will allow individuals to access capital, especially in communities of color and rural areas.”
As we’ve said, this $9 billion in financial help will not be directly written by the Department of the Treasury. Instead, the funding will be given to CDFIs and MDIs, who'll make use of the funding to, within the words from the Treasury Department, “provide long-term, low-cost equity and subordinated debt for participating institutions to support low-and-middle-income (LMI) communities.
What Are CDFIs & MDIs?
Community Development Banking institutions (CDFIs) are not-for-profit financial institutions (including banks and lending institutions) whose mission is to facilitate community development in disadvantaged areas. An economic institution must be certified through the government in order to be considered a CDFI. Read our explainer article on CDFIs to find out more.
CDFIs offer loans that tend to be simpler to be eligible for a than loans from banks. In addition to loans, the ECIP establishes that CDFIs is going to be providing grants to pandemic-affected businesses in the disadvantaged areas targeted by CDFI institutions.
Minority depository institutions (MDIs) are depository institutions (i.e. consumer banks and savings associations) that meet among the following two criteria:
- At least 51% of voting stock is owned by minorities OR
- A most of the board members are minorities AND the institution primarily serves communities whose populations are predominantly minority-based.
The Minority Depository Institution Program establishes that MDIs must help smaller businesses by giving financial products that could well be unavailable to the low-income, moderate-income, and other communities the MDI under consideration is supposed to serve. Our explainer article on MDIs adopts more detail about these institutions as well as their financial services.
Will The ECIP Help My Small Business?
CDFIs and MDIs serve businesses within the localities in which they operate and don't operate on a national scale. Therefore, in order to make use of the financial relief supplied by the ECIP, you’ll need to do so through a CDFI or perhaps an MDI that serves your area. CDFIs can be found while using CDFI locator on the Opportunity Finance Network. If you’re looking for an MDI, their list of MDIs from the Office from the Comptroller of Currency (OCC) displays the MDIs that currently exist combined with the area each one of these serves.
Details regarding how the $9 billion in ECIP funding is going to be distributed by the above mentioned banking institutions haven't been released yet. Businesses and people cannot yet make an application for this funding directly; the only real application materials released thus far happen to be for CDFIs and MDIs wishing to participate in the program.
To position yourself to make use of the ECIP once the funding starts being dispersed is defined rapport having a CDFI or an MDI if you don’t already have one. After, keep active in a representative in the institution to make sure you’ll be notified when ECIP-backed financial assistance opens up.
Additionally, the Treasury Department has additionally recently launched the CDFI Rapid Response Program, which is a $1.25 billion program that gives grants through CDFIs for pandemic-related needs. Another complementary program recently announced is the Emergency Support and Minority Lending Program, that is a $1.75 billion program to grow lending, grantmaking, and investment activity in low-and-middle-income minority communities and to minorities that have significant unmet capital or financial services needs.
This program is expected to spread out by early summer 2022.
To learn how you can use the ECIP a treadmill of those programs to help your small business, get in touch with a CDFI or an MDI in your town and request information as to how and when you are able to apply for funding.
Final Thoughts
This past year continues to be, to say the least, a severely hard time for smaller businesses everywhere.
To find out more about Paycheck Protection Act (PPP) loans, read our PPP loans article. It explains the rules and requirements from the program and details where you can obtain a PPP loan.
Likewise, you may want to find out about EIDL loans for pandemic relief. These loans does apply for directly using the SBA, however these loans are not forgivable and should be paid back.
Additionally, we’ve written articles on grant opportunities for minority-owned small businesses & startups that details nine grant programs for minority-owned businesses and lists their requirements.
Finally, ’s coronavirus hub contains all of our latest guides and helpful information on businesses attempting to survive and navigate the COVID era. Once we go into the second year of this pandemic, we’re working around the clock to assist small businesses however we can.
