Recovery Act Update: Treasury Announces Plan to Distribute $100 million in Stimulus Funds to Community Finance Entities

Last week, the U.S. Department of Treasury released the details of its plan to award $100 million in grants to community-based financial institutions. These funds, along with an additional $3 billion in tax credit authority, were allocated to Treasury programs by the American Recovery and Reinvestment Act (ARRA) last month. Both the grants and tax credits will support loan funds, credit unions, banks, venture capital firms and other financing entities through the department's Community Development Financial Institutions (CDFI) Fund.

The implementation plan provides $90 million in ARRA funding for CDFI Financial Assistance awards. Combined with FY09 standard annual funding, the CDFI Fund expects to make $145 million in Financial Assistance awards in this fiscal year. Another $8 million will support qualified Community Development Entities (CDEs) in Native American communities.

Financial Assistance awards invest in qualified CDEs that provide financial products and services in low-income and underserved communities. The awards enable CDFIs to leverage private capital to respond to the needs of their target market, and take the form of equity investments, loans, deposits, or grants. CDFIs provide loans, investments, training, technical assistance and basic financial services such as checking or savings accounts.

The new CDFI Fund plan not only increases the amount of financial support available through the Financial Assistance program, but also adjusts the program's rules to accommodate the growing need for development capital. Though applicants were always permitted to request awards of up to $2 million, awards were generally capped at $1 million or less. The fund now intends to make awards up to the $2 million limit. The pool of awards also will grow and the program expects to make more awards than in 2008. Applications that already have been submitted in 2009 may be reconsidered in light of the new changes. Even though the 2009 round of funding is closed, a new application window will be opened for new applicants. Awards will be announced in two rounds, in June and in September.

Similar changes have been made for the Native American CDFI Assistance program. The fund expects $14.5 million in total award funding to be available for FY09. This year's round of awards will be capped at $750,000 instead of $500,000. Submitted applications will be reconsidered and a new application window will be announced in the coming weeks.

CDFI's New Markets Tax Credit program, which grants an income tax credit for making qualified equity investments in designated CDEs, will divide the additional $3 billion in tax credit authority between the FY08 and FY09 award rounds. CDFI will reevaluate applications from 2008 and though no new applications will be accepted, many organizations that did not originally receive funding may now receive an award. With the additional FY09 funding, the program is expected to make approximately 100 awards, which will be announced in October.

Match Requirements Waived
ARRA also included language that waives several requirements for applicants to increase the availability of financial support. Awardees no longer are required to obtain matching funds from non-federal sources in order to receive grants. Also, ARRA lifts the $5 million limit on CDFI Fund financial assistance over a three-year period. These waivers apply to any awards made during the 2009 fiscal year, whether they were made from standard annual appropriations or from ARRA funding.

Treasury's CDFI Fund implementation plan is available at: http://www.cdfifund.gov/recovery/implementationplan.pdf