The Emergency Capital Investment Program (ECIP) was established by the Consolidated Appropriations Act of 2021. Congress handed it, and it was signed into legislation, to assist low-income and moderate-income neighborhood monetary establishments make loans to small companies and customers and to assist inexpensive housing efforts. Its final goal was to cut back wealth disparity, a big and rising subject throughout the nation.
The ECIP made it doable for the United States Department of the Treasury to offer as much as $9 billion to Community Development Financial Institutions (CDFIs) or Minority Depository Institutions (MDIs). These neighborhood banks can use the cash for loans, grants, and forbearances to small and minority-owned companies and people in underserved communities impacted by the COVID-19 pandemic.
Of the complete $9 billion, $2 billion was put aside for CDFIs and MDIs with lower than $500 million in belongings. Another $2 billion was earmarked for CDFIs and MDIs with lower than $2 billion in belongings.
A March 8, 2022, report about an audit of the ECIP by the Treasury Office of the Inspector General discovered that the Treasury Department did an inexpensive job implementing the program however missed the statutory deadline for distributing funds by greater than a month. Another subject: Distribution of funds was not widespread, throughout the U.S. as supposed. Instead, it was concentrated in only a few areas.
Because of those points, on December 2, 2022, The U.S. Department of the Treasury introduced it opened a second application round for funding in certified monetary establishments by means of ECIP. Approximately $160 million to $340 million in ECIP funding might be out there for funding in the second spherical. The software deadline for this funding spherical is January 31, 2023.
Treasury plans to prioritize candidates that:
- Were ineligible to use in the first funding spherical however at the moment are eligible to take part in ECIP.
- Serve geographical areas that obtained little funding in the first spherical (a lot of that funding was made in organizations in the south and southeastern United States, leading to complaints from funders in different elements of the nation.)
- Demonstrate a stable observe report of executing the ECIP plan, particularly with the ability to show a sample of lending to low- and moderate-income or minority people.
Among the candidates the Treasury Department is prioritizing are establishments identified to be extremely attentive to neighborhood wants.
This article explains all the things neighborhood lenders have to learn about the ECIP program.
What sorts of organizations are eligible for ECIP?
As I’ve already lined, a corporation have to be a licensed neighborhood growth monetary establishment or a minority depository establishment to be eligible for the unique ECIP and the current extension of it. In addition, it have to be:
Financial establishments that aren’t federally insured will not be allowed to take part in the ECIP, together with:
- CDFIs that aren’t banking establishments
- Cooperatives primarily based in Puerto Rico
- Privately insured credit score unions.
How to Qualify for ECIP
Applicants should apply for the ECIP extension on-line by the finish of the day, January 31, 2023.
Officials at the Treasury Department consider purposes to find out capital funding eligibility. As a part of the ECIP software course of, monetary providers organizations should put together and submit an Emergency Investment Lending Plan that:
- Demonstrates that 30 % or extra of the group’s lending over the earlier two fiscal years went on to low-to-moderate revenue (LMI) debtors, others focused by the program, or a mixture of the two.
- Explains how the group plans to deal with neighborhood growth wants.
- Outlines how the group will conduct neighborhood outreach and talk about the lending alternative by means of totally different channels like LinkedIn, press releases despatched to native media, academic webinars, and extra.
- Explains the way it plans to observe the necessities associated to most popular inventory and different monetary devices issued in Section 104A(b) of the Community Development Banking and Financial Institutions Act of 1994.
Limits to ECIP participation
Any group that has a helpful proprietor who’s a authorities official that immediately or not directly owns a 20 % or bigger share will not be eligible for an ECIP funding.
Under ECIP, collaborating neighborhood monetary establishments can solely subject monetary devices to Treasury with an combination principal quantity not larger than $250,000,000.
Financial devices are restricted to not larger than 7.5 % of complete belongings for organizations with belongings larger than $2,000,000,000. The restrict can’t be larger than 15 % of complete belongings for organizations with belongings between $500,000,000 and $2,000,000,000. The restrict will not be greater than 22.5 % of complete belongings for any establishment with belongings of lower than $500,000,000. In quick, smaller organizations can get the next share of their complete belongings in funding from ECIP than bigger ones. ECIP is genuinely a program made for small monetary establishments.
Across program investments, Treasury could make not lower than $4,000,000,000 out there for eligible organizations with complete belongings as much as $2,000,000,000 in the event that they apply on time and are permitted to obtain a capital funding beneath the program. Treasury could make not lower than $2,000,000,000 out there for organizations with complete belongings of lower than $500,000,000 that apply on time to obtain a capital funding by means of the program and are permitted.
The program was anticipated to finish six months after the President declared an finish to the COVID-19 nationwide emergency.
The ECIP so far
Even after ECIP was closed to new purposes on September 1, 2021, the program continued to distribute funds primarily based on pointers included in the Consolidated Appropriations Act, 2021. A March 8, 2022, Treasury Office of the Inspector General audit of the program discovered that officers moved rapidly to determine the program however didn’t start accepting purposes till March 4, 2021, effectively after the January 26 statutory deadline. As of December 14, 2021, 186 monetary establishments, principally concentrated in persistent poverty counties in the southern U.S. had been permitted for ECIP investments totaling $8.7 billion. Because of the complaints about the disparities of the program, it’s being reopened for a short while so extra organizations can qualify for the investments.
ECIP: The backside line
The $8.75 billion program is each a comparatively small and enormous initiative. It’s small relative to different authorities applications, akin to the CHIPS Act, which supplied virtually $380 billion to assist the U.S. semiconductor trade. Or the $800 billion Paycheck Protection Program (PPP), which supplied loans that we’re forgiven to small enterprise house owners. However, ECIP may be considered as massive, as effectively. Many banks should preserve a ten % reserve requirement. The $8.7 billion in contemporary capital may lead to virtually $90 billion in new lending to minority communities and others that basically want it.