What Is The Emergency Capital Investment Program (ECIP) & Can It Help My Small Business?

The COVID-19 pandemic has devastated the economic prospects of individuals and businesses in the US (and around the globe). Tragically, this devastation has been especially acute in communities that have been neglected and underserved by capital for generations. In an effort to address this economic pain, the spending bill enacted into law in December 2020 established the creation of the Emergency Capital Investment Program, or ECIP. The program was officially launched by the US Department of the Treasury on March 4, 2021.

Through the ECIP, up to $9 billion will be sent directly to Community Development Financial Institutions (CDFIs) and minority depository institutions (MDIs) so these institutions can provide funding and relief to communities in the US that have suffered the most from the effects of the pandemic and from decades of economic neglect.

We realize that we’ve just thrown some obscure acronyms at you, so with this article, we’re going to cut through the bureaucratic lingo and explain exactly how this new federal investment program stands to benefit the most economically vulnerable businesses and consumers in the US.

In doing this, we’ll explain exactly 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 up to $9 billion to CDFIs and MDIs. From there, this funding will be used to provide loans, grants, and forbearance for small and minority businesses and consumers in low-income communities. The ECIP sets aside $2 billion for participants with less than $500 million in assets and an additional $2 billion for participants with less than $2 billion in assets.

In a recent press release, Treasury Secretary Janet Yellin said the following 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 has made these deserts even more inhospitable . . . The Emergency Capital Investment Program will help these places that the financial sector hasn’t typically served well. It will allow people to access capital, especially in communities of color and rural areas.”

As we’ve said, this $9 billion in financial assistance will not be directly distributed by the Department of the Treasury. Instead, the funding will be distributed to CDFIs and MDIs, who will use the funding to, in the words of 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 Financial Institutions (CDFIs) are not-for-profit financial institutions (including banks and credit unions) whose mission is to facilitate community growth in disadvantaged areas. A financial institution must be certified by the government in order to be considered a CDFI. Read our explainer article on CDFIs to learn more.

CDFIs offer loans that tend to be easier to qualify for than bank loans. In addition to loans, the ECIP establishes that CDFIs will 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 one of the following two criteria:

• At least 51% of voting stock is owned by minorities OR
• A majority 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 small businesses by providing financial products that may otherwise be unavailable to the low-income, moderate-income, and other communities that the MDI in question is meant to serve. Our explainer article on MDIs goes into more detail about these institutions and their financial services.

Will The ECIP Help My Small Business?

CDFIs and MDIs serve businesses in the localities in which they operate and do not operate on a national scale. Therefore, in order to take advantage of the financial relief provided by the ECIP, you’ll need to do so through a CDFI or an MDI that serves your area. CDFIs can be found using the CDFI locator on the Opportunity Finance Network. If you’re looking for an MDI, this list of MDIs from the Office of the Comptroller of Currency (OCC) displays the MDIs that currently exist along with the area each one serves.

Details as to how the $9 billion in ECIP funding will be distributed by the above financial institutions have not been released yet. Businesses and individuals cannot yet apply for this funding directly; the only application materials released thus far have been for CDFIs and MDIs wishing to participate in the program.

To position yourself to take advantage of the ECIP once the funding starts being dispersed is to establish a relationship with a CDFI or an MDI if you don’t already have one. After, stay in touch with a representative from the institution to make sure you’ll be notified when ECIP-backed financial assistance becomes available.

Additionally, the Treasury Department has also recently launched the CDFI Rapid Response Program, which is a $1.25 billion program that provides grants through CDFIs for pandemic-related needs. Another complementary program recently announced is the Emergency Support and Minority Lending Program, which is a $1.75 billion program to expand 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 open by early summer 2021.

To find out how you can use the ECIP or one of these programs to help your small business, get in touch with a CDFI or an MDI in your area and request information as to when and how you can apply for funding.

Final Thoughts

This past year has been, to put it mildly, a severely trying time for small businesses everywhere.

To learn more about Paycheck Protection Act (PPP) loans, read our PPP loans article. It explains the rules and requirements of the program and details where you can apply for a PPP loan.

Likewise, you may want to read about EIDL loans for pandemic relief. These loans can be applied for directly with the SBA, but bear in mind that these loans are not forgivable and must be paid back.

Additionally, we’ve written an article on grant opportunities for minority-owned small businesses & startups that details nine grant programs for minority-owned businesses and lists their requirements.

Finally, Merchant Maverick’s coronavirus hub contains all our latest guides and resources for businesses trying to survive and navigate the COVID era. As we enter the second year of this pandemic, we’re working around the clock to help small business owners however we can.