Business group sues Treasury over withheld $300 million in community lender grants

A business advocacy group representing government-backed community lenders has filed a lawsuit against the U.S. Treasury Department, seeking to stop nearly $300 million in federal grants from expiring at the end of the month.

The Washington-based Freedom Economy Business Association lodged the suit in the U.S. District Court for the District of Columbia, arguing that the Treasury unlawfully failed to distribute fiscal year 2025 funding approved by Congress for Community Development Financial Institutions, or CDFIs. The group contends that because lawmakers appropriated the money and the lenders lawfully applied for it, the funds should be released.

The Treasury Department did not respond to a request for comment.

CDFIs are specialized lenders that finance small businesses, affordable housing projects, health clinics and other community initiatives that often struggle to access traditional capital. The Treasury certifies these institutions and distributes grants authorized annually by Congress. Most CDFIs do not take deposits, making federal funding a critical lifeline.

According to the lawsuit, the Treasury announced awards on September 15 but has not identified recipients or obligated the funds, leaving the money at risk of expiring when the fiscal year closes on September 30.

The group has asked the court to order the Treasury and the Office of Management and Budget to distribute the funds before the deadline and to proceed with an additional $289 million appropriated by Congress for fiscal year 2026. It also requested a temporary restraining order to immediately prevent the Treasury from "running out the clock," according to Alphonso David, CEO of the Global Black Economic Forum and lead counsel in the case.

The Trump administration last year said the organizations promoted a "partisan agenda," "gender extremism" and "climate radicalism," claims the lenders deny.

The funding delay has already led one CDFI to shutter, and community lenders have warned that further delays could cause more closures. Tynesia Boyea-Robinson, chair of Freedom Economy, told reporters that CDFIs have laid off staff, downsized operations and accrued debt.

"Many of our members are unable to serve the millions of people relying on them," she said. "This is all because the federal government has refused to follow the law and meet their obligations under the law."

The group expects a response from the courts within 48 hours, David said.