To help small businesses survive the pandemic, Wells Fargo announced Thursday that it is donating the $400 million in fees it earned off the federal Paycheck Protection Program to nonprofit organizations that primarily assist Black and other minority owners.
Wells Fargo, which lost many business customers after bungling their PPP applications, wound up processing more than 185,000 PPP loans worth a total of $10.4 billion, the fifth highest loan total in the banking industry, according to the U.S. Small Business Administration.
“We can see that small businesses are hurting,” said Jenny Flores, head of small business growth philanthropy at Wells Fargo. “Forty-one percent of small, Black-owned businesses have closed since COVID hit. We want to make sure we put our money where our mouth is.”
Community lenders said they hope other financial institutions follow suit, noting that no other bank has donated so much money in a single move to their efforts.
“This is huge,” said Maurice Jones, president of Local Initiatives Support Corporation, a New York nonprofit with community lending offices in 35 cities, including St. Paul. “I hope other banks will see this as a challenge and try to better them. I want to see them compete on this.”
Wells Fargo will be taking applications from community lenders over the next month, with money flowing by August. By January 2021, Wells Fargo expects to provide a total of $250 million to so-called Community Development Financial Institutions, which promote economic development in poorer communities that are traditionally underserved by banks. Flores said lenders will be providing a combination of grants and low-interest loans to struggling business owners.
“We know some businesses cannot absorb a loan at this time, so we are being very flexible in terms of how the money is used,” Flores said.
Another $100 million will flow to Small Business Development Centers and other groups that provide technical assistance to minority business owners, such as helping them with budgets, business plans and marketing. The remaining $50 million will be set aside for future needs of small businesses.
“We don’t have a crystal ball to say, ‘This is what small businesses will need a year from now,’ ” Flores said. “But we want to make money available to small businesses, so they have support on an ongoing basis to recover.”
Flores said Wells Fargo wants lenders to use some of the money to help businesses that were hurt in the protests following the death of George Floyd in Minneapolis. More than 1,500 businesses in the Twin Cities were damaged in the riots, with damages expected to reach $500 million.
“We haven’t earmarked any money, but we want to prioritize those applications when they come in,” Flores said.
Wells Fargo’s gesture to small businesses comes as it battles to emerge from a fake accounts scandal that has enveloped the company for nearly four years, a sprawling controversy that has upended its executive suite, sparked widespread litigation, and cost the company billions of dollars in fines and settlements.