The Treasury Department announced a program Wednesday to extend capital on more favorable terms to community development financial institutions to lend to small businesses in the hardest-hit communities.

Under the program, the Treasury would use up to $1 billion of Troubled Asset Relief Program capital to lend to CDFIs. They would owe a 2% dividend, compared with the 5% dividend banks paid under the Capital Purchase Program. The dividend rate would increase to 9% after eight years, compared with the five-year jump term under the CPP. In addition, CDFIs would not be required to issue warrants as part of the assistance.

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