For small businesses in need of cash but unqualified for traditional bank loans, Community Development Financial Institutions, or CDFIs, are an oft-overlooked option. With funding from governments, foundations, individuals, and banks, these local loan centers provide capital and advice to small businesses, microenterprises, nonprofits, and owners of commercial real estate and affordable housing in low and moderate-income communities.
Typically these mission-driven lenders seek opportunities to make a social impact with their capital investments. According to the National Community Investment Fund, “CDFIs are financial institutions that have a primary mission of promoting community development among their target markets, certified by the US Treasury’s CDFI Fund.”
Next City reported last week that of the nearly 1,000 “banks, credit unions, loan funds, and venture capital funds” in the U.S. that are considered CDFIs, “some are very small, with assets of less than $500,000; some are very large, with more than $100 million in assets. The majority, are between $1 million and $50 million in assets.”
Not sure a CDFI exists in your area? Bank of America, which claims its $1 billion-plus CDFI investments in all 50 states, Puerto Rico, and Washington, DC, makes it the nation’s largest lender to those institutions, wants to help you find one.
The bank this week published an online directory of 116 CDFIs, searchable by region and loan amount. The directory provides contact information for each CDFI, as well as details about resources offered, and eligibility requirements for business types and individuals.
But a few test searches of each prove that it’s worth your time to check both directories. A search of CDFIs serving Connecticut, for instance, turns up just 3 institutions in the CDFI Locator, but 9 in the Bank of America directory. If you’re in Wyoming, you won’t find any matches in the Opportunity Finance Network’s directory, but the Bank of America database will offer you three options for CDFI’s with nation-wide service areas.
What do small business owners stand to gain from a conversation with their area’s CDFIs? Bank of America points to the story of bakery owners who were turned down by a bank for a loan to open a third location in a depressed town. With a microloan from the Community Development Corporation of Long Island made possible by a Bank of America grant, Keith and Nancy Kouris were able to open a Blue Duck Bakery location in Riverhead, NY. At least four more family-oriented stores have opened in the community, according to Bank of America.
Follow Adrienne Burke @adajane