Wells Fargo says it collected $400 million in processing fees for making Paycheck Protection Program loans. Now the San Francisco-based bank has pledged to donate all those fees to nonprofit organizations that are trying to help small businesses recover from the coronavirus pandemic.
Wells and other large banking companies such as JPMorgan Chase, Bank of America and Citigroup have said for months they will give away the processing fees generated by PPP loans after critics complained about lenders’ profiting from the rescue program. Wells said it will donate gross proceeds earned through the program, which originally ended June 30 but has now been extended through Aug. 8. BofA and Citi said they will donate net proceeds.
So far, JPMorgan, BofA and Citi haven’t said how much they plan to give away in total.
On Thursday, Wells Fargo announced the creation of the “Open for Business Fund” that will work with nonprofits across the country to provide capital, technical assistance and support aimed at long-term recovery and resiliency for small businesses, especially minority-owned ones. So far, the $1.9 trillion-asset bank says it has made $10.1 billion of PPP loans to more than 179,000 customers, with an average loan amount of $56,000.
“By donating approximately $400 million in processing fees to assist small businesses in need, Wells Fargo’s Open for Business Fund creates opportunities for near-term access to capital and addresses the road ahead to meaningful economic recovery, especially for Black and African American entrepreneurs and other minority-owned businesses,” CEO Charlie Scharf said in a news release.
Last week, New York-based Citi said it has already donated $25 million in PPP fees to the Citi Foundation, which is partnering with community development financial institutions, or CDFIs, to support small businesses hurt by COVID-19. In May, Charlotte, N.C.-based Bank of America said it will use net proceeds to support small businesses, communities and nonprofits.
Wells’ $400 million will be split into three areas, according to Jenny Flores, head of small-business growth philanthropy. Flores said most of the money — $250 million — will be allocated to CDFIs, with a focus on Black and African American-owned small businesses.
A June report from the National Bureau of Economic Research shows the number of Black small-business owners fell by 41% and the number of Hispanic small-business owners fell by 36% between February and April.
About $100 million in grants will be distributed through economic development agencies and other organizations to help small businesses with long-term recovery, Flores said. The final $50 million is being directed to nonprofits that will assist small businesses with training, mentoring and other education so that those companies can adapt their business models as necessary.
Starting Thursday, the fund will accept applications from CDFIs for the first grant cycle, which runs through Aug. 7 and through which $28 million in initial funding will be available, Flores said.
The fund is a three-year effort, with the bulk of the money to be distributed by January 2021.
