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TOOLKIT

Community Economic

Development Toolkit

COMMUNITY DEVELOPMENT INVESTMENT FUNDS

Disclaimer

This fact sheet was produced by the California Community Economic Development Association, in partnership with the Community Action Partnership National Office, as part of the U.S. Department of Health and Human Services, Office of Community Services. The “Community Economic Development” publication series is designed to increase the knowledge of processes for community economic development projects nationwide. The contents of this manual are presented as a matter of information only. Nothing herein should be construed as providing legal, tax, or financial advice. The materials referenced and the opinions expressed in this product do not necessarily reflect the position of the U.S. Department of Health and Human Services, Office of Community Services, and no official endorsements by that agency should be inferred.

Support for the Community Economic Development project and this toolkit is provided by the Department of Health and Human Services Administration for Children and Families, Office of Community Services (OCS), grant award number: 90ET0426/01.

CommunityDevelopment(Equity)Investment/LendingFunds 1

COMMUNITYDEVELOPMENT(EQUITY)INVESTMENT/LENDINGFUNDSUseofthisGuideTheCommunityDevelopmentLendingandInvestmentEntityGuideisintendedforusebycommunitydevelopmentorganizationsforthefollowingpurposes:

1. OrganizationswantingtolearnaboutEquityInvestmentFunds2. Organizationscreatingalternativelendingandinvestmentprograms3. Organizationsseekingservicesandcapitalfromloanfunds

NOTE:Forpurposesofthisguide,focuswillbeonbusinesslending/investment(tostart,expandorinvestinbusinessdevelopment)andtoalesserdegreeonpersonalloans(home,autooreducationalloans).Thisisoneoffiveguidesthatdiscussthefollowingcategoriesoflendingandinvestmentactivities:

1. CommunityDevelopmentLoanFunds(CDLFs):ThisbroadcategoryincludesallloanfundsthatarenotCreditUnionsorEquityInvestmentfunds.Theinformationinthissectionincludesthestepsandconsiderationsforstartingaloanfund.

2. MicroloanFunds:Thisisasubcategorytypeofloanthatfundfocusesonsmallerloans,primarilyforstartupfinancing.

3. CreditUnions:Thisisafederal/statedesignationforalendinginstitutionthatmeetscertaincapitalrequirements,operatingguidelinesandmanagementsystems.

4. EquityInvestmentFunds:Fundsthatprovideequityinvestment(versusloans)intocommunitydevelopmentactivities.

5. CommunityDevelopmentFinancialInstitutions(CDFIs):ThisisaFederalUSTreasurydesignationbasedonorganizationalandlendingstandardsthatallowsloanfundsaccesstoUSTreasurygrantsthroughtheCDFIFund(includesmostCDLFs,MicroloanfundsandCreditUnions).

Organizationsinterestedinexpandingaccesstocapitalforunderservedcommunitieshavefocusedonvariousformsofloanandinvestmentfunds.ThisguideisfocusedonEquityInvestmentFunds.Thesefundstargetcapitaltospecificbusinessesanddevelopmentbuttaketheformofequityversusdebt.Wewillusetheterms“equityinvestmentfunds”synonymouslywith“loan/equityfund“forthefollowingreason:

Intheworldofcommunitydevelopmentfinance,thelinebetweenequityanddebtisbroaderthantraditionalprivatesectordebtandequity.Inmanycases,equityhastakenonmanyqualitiesfoundintraditionaldebtaswellasdebthavingequitylikequalities.Primarilydrivenbyaffordablelowincomehousingtaxcredit(LIHTC)requirementsinthelate1980’s,localgovernmentsthroughhousingandcommunitydevelopmentdivisionsprovidedfinancingneededformulti‐familyrentaldevelopment.

Inthepast,localgovernmentswouldmakegrantstotheprojectthatfirmlyfitthedefinitionofequity,therewerefewrequirements(deedrestrictions,developmentagreements)buttheyclearlywerenotloanswithsetinterestandrepaymentperiods.BecauseofIRSrelatedLIHTC

interpretations,theverysamegrantsneededtolookmorelikealoan.Thisenabledthefinancingtobeincludedintheprojectseligiblebasis,themeasurethatdeterminestheamountofLIHTC’sallocatedtotheproject.(Themoreprojectbasisresultsinmorecreditssoldtoinvestors,generatingmoreequityintotheproject).

Todecreasethecashflowburdenandtoinsureprojectrentsremainedaffordabletolowandmoderateincomeindividualsorfamilies,the“loan”hadverylowinterestrates,extendedtermsandinmostcases,paymentwasdeferreduntilmaturity,orpaidonlyiftherewereexcesscashflow.

EarlybankunderwritersthatspecializedinfinancingLIHTCprojectsinitiallyconsideredallofthisfinancingaspartoftheprojectsequity,butastimehaspassedwillnowvaluethebelowmarketfeaturesofthefinancingagainstamarketrateloan,withthedifferencebeingvaluedas“equity”.

Parallelingthistrend,mostlocalgovernmentfinancingthroughCDBGortaxincrementhaveincludedthesefeaturesforothernonhousingcommercialandindustrialfinancing,i.e.,aloanwithveryfavorableterms.

Manycommunitydevelopmentorganizationsthatreceivesgrantsthroughthepublicorprivatesectorforequityfundshavealsocreatedequityinvestmentswithveryfavorabletermsorrequire“0”interest.Thedegreeofthefinancinglookinglikeequityversusdebtistypicallydrivenbymarketconditionsboundedbythegoalsofthecommunitydevelopmentorganization(jobcreation,physicalimprovement)andguidedbywhattheeconomicconditionsaretoenticeabusinesstolocateorexpandinanygivenmarket.

Manyoftheseformsof“loanlike”investmentfundscanbeeligibletobecomecertifiedCommunityDevelopmentFinancialInstitutions(CDFIs).Thisfederalcertificationallowsloanandinvestmentaccessawidermenuofgrantsandprogramsdesignedtobringcapitaltolowincomeandunderservedcommunities.

Itisimportanttonotethatlendingentitiesmustkeeploanpoolsandequity/investmentpoolsseparate.Eachwillhaveitsownsetoflendingpoliciesandguidelinesandareforverydifferentuses.Loanswilltypicallybeguidedbyloantovalue(LTV)anddebtcoverageservice(DCS)ratios,whileequity/investmentfundswilltakethenextlevelofriskandwillbesubordinatetotheconventionallystructuredloan.Theywillaccepthigherrisk(LTVandDSCratios)ifstructuredasaloan.

CDFIsarebecomingthestandardnomenclaturecategorizingallcommunitydevelopmentlendingandinvestmententities(albeitnotallsuchentitieshaveobtainedtheofficialUSTreasurydesignation,mosthaveandwillapplyfortheCDFIdesignationbecauseitrepresentsarecognizableindustrystandard).TheOpportunityFinanceNetworkistheassociationrepresentingalltypesoflendinginstitutionsandhasbroadlycategorizedalllendinginstitutionsasCDFIsandsubcategorizedlendingandinvestmentinstitutionsasfollows:1

“Aswithmainstreamlenders,avarietyofinstitutionshasemergedtoservethebroadrangeofneedsinemergingdomesticmarkets.Althoughtheyshareacommonvisionofexpandingeconomic

1 Opportunity Finance Network, website: www.opportunityfinance.net

opportunityandimprovingthequalityoflifeforlowincomepeopleandcommunities,thefourCDFIsectors—banks,creditunions,loanfunds,andventurecapital(VC)funds—arecharacterizedbydifferentbusinessmodelsandlegalstructures”:

1. CommunityDevelopmentBanks:Communitydevelopmentbanksprovidecapitaltorebuild

economicallydistressedcommunitiesthroughtargetedlendingandinvesting.Theyareforprofitcorporationswithcommunityrepresentationontheirboardsofdirectors.Dependingontheirindividualcharter,suchbanksareregulatedbysomecombinationoftheFederalDepositInsuranceCorporation(FDIC),theFederalReserve,theOfficeoftheComptrolleroftheCurrency,theOfficeofThriftSupervision,andstatebankingagencies.TheirdepositsareinsuredbyFDIC.

2. CommunityDevelopmentCreditUnions:Communitydevelopmentcreditunions(CDCUs)promoteownershipofassetsandsavingsandprovideaffordablecreditandretailfinancialservicestolowincomepeople,oftenwithspecialoutreachtominoritycommunities.Theyarenonprofitfinancialcooperativesownedbytheirmembers.CreditunionsareregulatedbytheNationalCreditUnionAdministration(NCUA),anindependentfederalagency,bystateagencies,orboth.Inmostinstitutions,depositsarealsoinsuredbyNCUA.

3. CommunityDevelopmentLoanFunds:Communitydevelopmentloanfunds(CDLFs)providefinancinganddevelopmentservicestobusinesses,organizations,andindividualsinlowincomecommunities.Therearefourmaintypesofloanfunds:microenterprise,smallbusiness,housing,andcommunityserviceorganizations.Eachisdefinedbytheclientserved,thoughmanyloanfundsservemorethanonetypeofclientinasingleinstitution.CDLFstendtobenonprofitandgovernedbyboardsofdirectorswithcommunityrepresentation.

4. CommunityDevelopmentVentureCapitalFunds:Communitydevelopmentventurecapital(CDVC)fundsprovideequityanddebtwithequityfeaturesforsmallandmediumsizedbusinessesindistressedcommunities.Theycanbeeitherforprofitornonprofitandincludecommunityrepresentation.

Thecompanion“CommunityDevelopmentFinancialInstitutions(CDFI)Guide”alsotouchesonmanyaspectsofloan/equtiyfundsandshouldalsobereviewed.TheCDFIGuidehoweverisusuallythe“nextstep”forestablishedloanfunds.Wewouldalsorecommendreviewingthe“BusinessTechnicalAssistanceGuide”sincethetwocommunitydevelopmentactivitiesworkhandinhand.Duetorecenteconomicandfinancialturmoil,commerciallendersandinvestorshavetightenedlendingrequirements,resultingina“creditcrunch”wherecreditneedsaregreaterthanresources.Thiseconomiclandscapehasresultedincommercialfinancialinstitutionsrelyingmoreoncommunityloanfundsasthemechanismtobetterservenichemarketneeds.Financialinstitutionsnowinvestandlendmoreaggressivelytofinanciallysoundandstableloanfunds.LoanfundshavebuiltastrongreputationbyunderstandinglocalcreditnuancesandneedsresultinginsoundlendingandstrongloanportfoliosLoan/investmentfundscomeinmanysizesandfocusonamyriadofcommunitydevelopmentcreditneeds.Thisguidewillfocusoninvestmentfunds.Investmentfundsareintegratedwithtrainingandbusinesstechnicalassistanceprograms.Togethertheseresourcesenhanceandsupportthesmallbusinessindustry,averyimportantpartofcommunitydevelopmentandstabilization.Businessprograms,servicesandloanandinvestmentfundsareusuallymanagedbythesameorganizationthatprovidescomprehensivebusinessassistance.Loan/investmentfunds,howevercanstandaloneandbecomeacentralizedfundingmechanisminpartnershipwithotherlocalandregionalbusinesssupportprogramsandorganizations.

Forsuccessfulloan/investmentfunds,theCDFIdesignationisveryimportantandallowslendingprogramstogrowdramatically.MostfoundationandcorporategrantsandinvestmentsfromfinancialinstitutionslookfortheCDFIdesignationbeforegrantorinvestmentdiscussionsbegin.Overthelastthreeyears,financialinstitutionshavebeenveryactivelyseekingsoundCDFIstoinvestin.CDFIshavebeenaverysuccessfulmechanismforfinancialinstitutionstomeetlendingandinvestmentmeasuresrequiredbytheCommunityReinvestmentAct(CRA)andenforcedbybankingregulators.AhighCRAratingisneededifthefinancialinstitutionhasplanstoexpandinthefuture.TheCDFIdesignationisdeterminedthroughacertificationprocessconferredbytheCDFIFundoftheDepartmentofTreasury.Thedesignationisforfinancialinstitutions(andlendingprogramsincludingcommunityloanfunds)andallowsaccesstoTreasuryprogramsandinvestments.NOTE:BecausetheCDFIdesignationissoimportant,itwillbereferredtothroughoutthisguideandwillbesummarizedattheend.The“CommunityDevelopmentFinancialInstitutionsGuide”shouldbereferredtofordetailsontheCDFIFundanditsprograms.Equityfundsplayanintegralroleinacommunityeconomicdevelopmentstrategy.Loan/investmentfundsbringcapitaltounderservedmarketsthatincludebusinessfinance(startup,micro,non‐profit,smallandbusinessexpansion),realestatedevelopmentfinance(affordablehousing,commercialandoffice,communityfacilitiesandindustrial)andpersonalfinance(auto,homeorpersonal).Capitalenhanceseconomicstabilitywhilecreatingjobsandopportunitiesforcommunityresidents.Creationofpersonalandcommunityassetsisakeystoneinbuildingandstrengtheningcommunities.Thesefundsalsobringcommunitiesahigherleveloftechnicalexpertiseinbusinessandfinance,increasingthepotentialforsustainedcommunitystabilityandgrowth.Financialinstitutionshavebecomemoreeffectiveinmeetingcustomerdemandsinlowincomeanddisadvantagedcommunitiesthroughchannelscreatedbyloanfunds.Financiallysuccessfulfundsgenerateincometocoverorganizationaloperatingandoverheadexpensesandcanbringadditionalincometosupportothercommunitycreditneeds,suchasbusinesstechnicalassistanceprogramsandexpansionoflendingservices(suchasautoloans,microloans,homeorbusinessloans).Astrongerandfinanciallyviablelendingbusinessenhancestheoverallsuccessandlongevityofyourcommunitydevelopmentorganizationwhilesupportingcommunitycreditneeds.Loan/investmentfundsplayaveryimportantroleincommunitydevelopment(revitalizationandstabilization).Theeffectsaresubstantialandinclude:FortheOrganization:

1. Generatesadditionalincomefortheprogram2. Supportsandallowsforthecreationofcomplementaryprograms,servicesandprojects3. Expandsstaffcapacityandcapabilitiesbyattractingandretainingexperienced

professionalsinbusinessfinanceanddevelopmentForthecommunity:

1. Increasesaccesstocapital2. Increasedaccess‐relatedresourcessuchastrainingandtechnicalassistanceintheareasof

financeandbusinessdevelopment3. Createspersonalandcommunityassets

4. Enhancesthelocaleconomybysupportingimportantsegmentsoftheeconomicinfrastructureincludingbusiness,residentialandindustrialsectors

5. Providesaneededfundingresourcethatifstructuredasaloan,canfillfundinggaps,andifstructuredastrueequity,canjustifymoredebt.

Successfullendingefforts(andancillaryfinancialprograms)resultsineconomicallystrongercommunities,strongerworkforces,moreinformedandcapablebusinessesandtenants,andultimatelyastrongerandmoreinclusiveeconomy.

COMMUNITYDEVELOPMENTLOAN/INVESTMENTFUNDSThegeneralcategoryofcommunitydevelopmentloan/investmentfundsincludesmanytypesoffundscreatedtomeetspecificmarketneedsandconcerns.Thereisanextensivenetworkoflendingentitiesthroughoutthecountrydevelopedbyandthroughvariousfundingsources.Theseinclude:

1. EconomicDevelopmentLoanFunds:Manytimesmanagedbylocalgovernments,theseloanfundsarecapitalizedbyvariousfederalfundingsourcesthatincludeCommunityDevelopmentBlockGrants(CDBG),repaymentfromUrbanDevelopmentActionGrants(UDAG)andtheEconomicDevelopmentAdministration(EDA)Grants.TheearlyformsofCDBG,EDAandtaxincrementfundedentitieswereusuallyprogramswithintheredevelopmentorcommunitydevelopmentagency,butcouldbeaseparatelendingenterprise.OthergovernmentsupportedeffortsincludethosebytheSmallBusinessAdministration(SBA)intheformofSmallBusinessInvestmentCompanies(SBIC)2andMinorityEnterpriseSmallBusinessInvestmentCompanies(MESBICS)3.Mostoftheseentitiesarecreatedandmanagedbylocalgovernment(orstronglyrelatedentities)andhavebeenusedtosupportmajorinnercityrevitalizationandimprovementefforts.

2. Thesecondmajorcategoryistheprivate,non‐profitloanfundsoperatedbycommunitydevelopmentorganizationsusedtofinanceaffordablehousing,non‐profitfacilities,localbusinessandindustryandotherprojectstargetedtolowincomedistressedcommunities.Capitalforthesefundscomesfromboththepublicandprivatesector.Thiscategoryofloanfundsisthefocusofthisguide.

AccordingtotheOpportunityFinanceNetwork,“Communitydevelopmentloanfunds(CDLFs)providefinancinganddevelopmentservicestobusinesses,organizations,andindividualsinlow‐incomecommunities.[Loanandinvestmentfunds]aredefinedbytheclientserved,thoughmanyloanfundsservemorethanonetypeofclientinasingleinstitution.CDLFstendtobenonprofitandgovernedbyboardsofdirectorswithcommunityrepresentation.”4

CDLFsarenotregulatedentitiesanddepositsorinvestmentsintofundsarenotguaranteed;howevermostadheretoastandardcreatedbytwomajorentities.ThefirstisafederalprogramthroughtheCommunityDevelopmentFinancialInstitution(CDFI)Fund.TheFundhasestablishedguidelinestobecomeaCDFI(andbeeligibleforprogramgrants).ThesecondhasbeenestablishedbytheOpportunityFinanceNetwork(OFN).OFNisanon‐profitassociationwhosemembershiprequiresthatprospectivemembersmeetperformancestandardsthatareappropriatefortheirparticularoperatingcontext.OFNstandardsarebasedon: 2SBICisaprivateinvestmentcompanyco‐fundedbytheSmallBusinessAdministration.SBICsprovidebusinesseswithdebtorequityfinancingoptions.AlloftheSBICsareprivatelyowned,buttheyarelicensedandregulatedbytheSmallBusinessAdministration.Usingtheirowncapitalandloanguaranteesfromthegovernmentthesefinancialinstitutionsmakeequityanddebtinvestmentsintobusinesses.Abusinesswithanetworthoflessthan$18millionandanaftertaxincomeof$6millionwillqualifyasasmallbusinesstoreceivefunding.3MESBICsareprivateinstitutionsthatinvest(debtandequity)exclusivelyincompaniesownedorcontrolledbymembersofminoritygroups.TheyareregulatedbytheSmallBusinessAdministrationandareeligibletosellnotesorstocktotheSBAtoleveragetheirprivatecapital. 4 Opportunity Finance Network, Website: www.opportunityfinance.net

1. MissionandImpact:Primarymissionto“striveandtohaveapositiveimpactonlowincome.Low‐wealthandotherdisadvantagedpeopleandcommunities”5

2. FinanceLedStrategy:Lendingactivityhistoryofovertwoyears,beanon‐governmentalentityandprovideaffordable,responsiblefinancialproductsandprovidefinancialservices.

3. CommitmenttoPerformance:Meetcertainloanandriskmanagementpoliciesandprocedures,haveauditedstatementsandmeetcertaincapitalandportfolioratiosandrequirements.

4. SupportOFN’sMissionOFNalsoprovidesextensivetechnicalassistanceandaccesstoinformationanddatatoassistinthestart‐up,operationandmanagementloanfunds.LendingandInvestmentProgramFeasibilityConcepts:Operatingaloanorinvestmentfundisabusiness.Fundscangenerateincomefororganizationsiftheyareoperatedproperlyandhavetherightlevelofactivity.Keymanagementtermsandconceptsinclude:

1. CostofFunds:Yourloanpoolmayincludevarioussourcesofgrantsandinvestmentfunds.Somewillcomeinatdifferentinterestrates.Theblendedrateistheaveragerateforyourloanpool.Ifyoureceivedallgrantstheratewouldbe“0”butifyoureceivedaninvestmentorloan,theratemightbe2‐5%.

2. InterestRateSpread:Thespreadisthedifferentialbetweencostoffundsandwhattherateofreturnisforyourfunds(averageinterestrateyouarecharging).

3. Breakeven:Thisistheminimumrate(abovethecostoffunds)youneedtochargetocoveryourexpenses.

4. FundExpensesandOverhead:Expensesincludebusinessoperations(loanandportfoliomanagement),businessmanagementandmarketing,officeandstaffcosts.Theseareexpensesthatshouldbepaidfromtheincomederivedfromthe“interestratespread”.Ifyourincomedoesnotcoverexpenses,youwillneedtosecureongoingfundingforoperations.

5. LoanLoss:Thisistheexpectedrateoflossesinbadloans.Allfundshaveprovisionsforloanlossesandthemoreaggressivethefundis(willingtotakemorelendingrisks),thegreaterthelossescouldbe.Successfulfundsestimateloanlosseswellbelow5%(whichatonetimewasastandardcommerciallendinglossexpectation).

6. LoanLossReserve:Loanlossreservesarefundssetasidethatmaybeneededtorepayanyloansorinvestmentsmadetoyourfund.Ifyourfundconsistsofamixofloansinvestmentsandgrants,andaportion(ormajority)ofthebadloanneededtoberepaidtoalenderorinvestor,youwoulddrawthefundsfromaloanlossreserve.Ifoneloanwentbadandyourfundlost$25,000.,youwouldneedtotapintothereservetorepaythelenderorinvestor.Theriskieryourlendingisorifyouhavehadhistoricallyhighloanlosses,youwouldneedahigherloanlossreserve.Highloanlossreservesdonotbenefityourfundsincetheyaredollarsthataresetasideandarenot“working”asoutstandingloansorgeneratinginterestincome.

Infinancialinstitutionsandinlargerfunds,loansinportfolioarerated.Thosewithgreaterriskorinvariousstagesofdistress(latepayments)willhaveahigherpercentagesetasideforpotentialloanlosses.

7. Feasibility:Incomeneedstoexceedexpenses.Thelargerthelendingpool(andleveloffundingyouhaveouttoborrowers)thegreateryourpotentialreturnsare.Similarly,

5 Ibid

smallersizedfundshaveamoredifficulttimegeneratingincometocoverexpenses.Smallerloanshavegreaterrelativeoperatingcostsbecausehandlingandprocessingcostsforeachtransactionisaboutthesamewhethertheloanisfor$500or$5,000,000.

8. PartnershipAgreements:Ifstructuredasequity,partnershipagreementswillincluderequirementssuchaspossiblerepayment,thenumberortypesofjobscreated(preferentialhiringoflocalresidents)ormayincludethelevelofinputintoprojectmanagement.

StartuporExpansionThefollowingsectionwilldiscussvariousstrategiesandstepsthatshouldbeconsideredifyouareastartuploan/investmentfundorifyouareexpandingtogainCDFIdesignation.Wewilllookatthefollowing:

1. Start‐uploanfund:A. AsanewfundB. Throughapartnership

2. Existing,slightlyexperiencedloanfund3. Existing,experiencedloanfund

Startup:Startingaloan/investmentfundisverydifficultduetocosts.Fundingisneededforbusinessoperationsandfortheloanfund.AlendingtrackrecordisneededtoattractfinancingortobecomeeligibleforatechnicalassistancegrantthroughtheCDFIFund.Thefollowingisasuggestedguidefororganizationsthathaveclearlyidentifiedneedsandstrongsupporttocreateafund.Supportfromyourorganizationandboardiscritical.Thefundshouldbetargetedtoaspecificmarketsegment:microbusinesses,smallbusinesses,affordablehousingorconsumerfinancing.TherearetwopotentialwaysofbecomingaCDLF,onestartingfromscratchandonethroughpartnerships.Strategy1:NewFund(Ifyourplanscallforthecreationofanewfundorstartup).Asignificantamountoffundingandpredevelopmentworkisneededfordevelopingthebusinessplan,marketingandmanagementplans.ConsiderapplyingforaCDFITechnicalAssistanceGrant.Youwillalsoneedfundingforoperationsandfortheloanfund.Ifthisisthecase,considerthefollowingsteps:

1. FundInitiation:Secureseedfundstoallowforstafforconsultantassistanceforthefollowing:(fundingcouldbelowerifyourstaffhasthetimetoconductthepreliminaryresearch)

A. ConceptPaper:Creationofaonetotwopagesummarythatincludesasummarydescriptionofyourorganization,needs,size,management,andpotentialresourcesavailableforthebusinessandfund.

B. CommunitySupport:Obtainsupportfromentitiesthatrepresentyourtargetmarket

C. PublicandPrivateSectorSupport:Identifysupportfromentitiesthatrepresentsyourtargetmarket

D. IdentifypotentialsourcesforpredevelopmentfundsE. Seekgrants(orplantoself‐finance)

2. GO/NOGO:Theinformationresearchedabovewillallowyoutodeveloptheconceptpaper.Thiswillallowyourorganizationtodecideifthecreationofaloanfundmakessenseandis

feasible.Securingpredevelopmentfundswillbeessentialespeciallyifyouaretryingtocreatealargefund.Theconceptpaperwillbethebasisofthebusinessandmarketingplan.

Determinationofthescope,size,anddirectionofyourloanfundshouldprovideagoodindicationoffeasibility.Sourcesofinitialcapitalaresecuredthroughfoundationandcorporategrantsand,insomeinstances,fromlocalgovernmentprograms,especiallyifthereisatargetedmarketwithtremendousneeds.

Financialinstitutionsoftenprovidecorporategrantstopenetratemarketsbyeffectivelypartneringwithcommunityorganizationsthatrepresentandservethesecommunities.Youmustmakethecase,presentneed,andindicatehowyourorganization’srolewillenhancetheeffort.(SeeDevelopmentTipsattheendoftheGuide)

YourorganizationmustassesshowtheproposedprogramcostswillbenefittheoveralleconomicdevelopmentstrategyofthecommunityandorganizationwhileassessingimpactstoindividualCEDprojectsandprograms.Thecreationofaloanfundofferssubstantialbenefitstothecommunityanditseconomicwellbeing.

3. Pre‐developmentActivities:A. BusinessPlan/MarketAnalysis:Conductamarketanalysisanddevelopabusiness

planforthefund.B. ManagementPlan:

1.) FundManagement:Includedarethedocumentsthatdefinelendingparameters,lendingguidelines,requirementstheapplicationprocess.

2.) LoanManagement:Includedaretheloanmanagementfunctions(loanapprovalprocess,closing,documentation,andloanmanagement(billing/collections)process).

3.) PortfolioManagement:Guidelinesandstandardsonriskmanagement(loanlosstolerance,reservesandriskratingofloans).

4. Board:CreationoftheBoardofDirectorsisaveryimportantstepthatbuildsthefoundationforasuccessfulloanfund.

A. Properbalancebetweenmission(helpingimprovedistressedcommunities)andrisk(lendingguidelinesandrequirements)ismaintainedbyboardrepresentation.

B. Fundraising:Fundraisingisacriticalneedforloanfundsandhavingrepresentativesfromentitiesthateitherfunds/investsinloanfundsorareinpeerindustriesthatcansupportloanfundactivitiesiscritical.

C. Management:Expertiseinlending,businessorlawprovidesthenecessaryinputandoversightoflendingactivitiesandoverallsuccess.

5. LoanCommittee:Theloancommitteeshouldinmanywaysmirrorthebalanceoftheboardofdirectorsbuthavefocusonmanagementissues.Thecommitteemusthavemembersversedinunderstandingofthelendingguidelinesandpoliciesofthefund.Experiencedlenderscantypicallyberecruitedfromfinancialinstitutionsthatinvestorlendintothefund.

6. StartUpLendingActivities7. ApplicationforaCDFIcertification.Onceyoureceivecertificationyouareeligibletoapply

foraTechnicalAssistanceGrant(toconductorupgradeyourbusinessplan)orforaFinancialAssistanceAward(grantforyourloanpool).NOTE:YoucanapplyforaTechnicalAssistanceGranttostartaCDFIandloanpoolfromscratch,buttheseareinveryhighdemandandareverydifficulttoobtain.Themoreexperienceyouhave,thegreaterthepossibilityofreceivingagrant.

Strategy2:Partnership:IfthereareotherloanfundsorCDFIsoperatinginyourarea(ornearby),youmaywanttoconsiderpartnershipsthatwillleveragetheirexpertisewithyourunderstanding

oflocalneeds.Thisstrategyallowsyoutobuildcapacityandexpertiseandmaintainagoalofcreatingyourownloanfund(andpotentiallyobtainCDFIcertificationatalaterdate).Someofthestrategiesinclude:

1. ExpansionofServiceArea:Ifitispossible,anexistingloanfundorCDFIcouldexpanditscoverageareatoincludeyourgeography.Youcouldbecomeamarketingarmfortheirproductsandservicesandpossiblyprovidespace,coordinatemeetingsorprovidelanguageservices.

2. CreationofaDedicatedFund:Ifthereissignificantinterestandresourcesforcreatingafund,youmaywanttoconsidercreatingoneandhavingtheCDFIorneighboringloanfundmanageit.Therearesignificantongoingexpensesforoperationsandall“back‐room”operations(loanservicingandmanagement).Yourorganizationcouldparticipateindevelopingthelendingguidelinesandstandards,orpossiblybeontheloancommitteeforthefund.Thisintermediarystepallowsyoutogainexperiencethatyouwillneedifyoucreateyourownfund.

Thepartnershipstructureisimportantifyouareconsideringoperatingasmallloanfundorprovidesmallerloans.Remember,themanagementandhandlingcostsforasmallloanarethesameasforlargerloans.Inaddition,thelargertheloanpool(andthegreatertheamountoffundedloans)generatesmoreinterestincomeusedforoperationsandmanagement.Forthesesmallerpools,itmayfinanciallywisetohaveanotherinstitutionserviceandmanageyourloanfund.Anotherstrategytoloweringoperatingcostsistopartnerwithotherorganizationsthatcouldhandlemarketing,trainingandtechnicalassistance.Existingslightlyexperiencedloanfund:Ifyourorganizationhassomeexperienceinlendingorwantstobuildalendingtrackrecord,youcanimmediatelyapplytobecomeaCertifiedDevelopmentEntity(CDE)throughtheUSTreasury’sCDFIFund.AlthoughthedefinitionfocusesonNewMarketsTaxCredits,aCDE’sactivitiesmeetCDFIstandardsandprovideanestablishedcertifiedlendingtrackrecordfororganizations.AsaCDEyouwillbeabletoapplyforCDFIcertificationandaTechnicalAssistanceAward.TheprocesstobecomeaCDEisstraightforwardandrelativelysimple.

AsdefinedontheCDFIwebsite,“aCDEisadomesticcorporationorpartnershipthatisanintermediaryvehiclefortheprovisionofloans,investments,orfinancialcounselinginLow‐IncomeCommunities(LICs).BenefitsofbeingcertifiedasaCDEincludebeingabletoapplytotheCDFIFundtoreceiveaNewMarketsTaxCredit(NMTC)allocationtoofferitsinvestorsinexchangeforequityinvestmentsintheCDEand/oritssubsidiaries;ortoreceiveloansorinvestmentsfromotherCDEsthathavereceivedNMTCallocations.”6

TheOfficeofCommunityServices(OCS)CommunityEconomicDevelopmentGrantscanbeusedbyorganizationsasanequityinvestmentintoabusinessentity,whetheritisastartuporexpansion.Typicallythesesinvestmentsaredesignedtocreatejobsandcanhaverepaymentrequirements.Communitydevelopmentorganizationshaveusedthisstrategyovermanyyears,obtaininganumberofgrantsthatarerecycledtocreatemoreinvestmentandjobs.

Existingorexperiencedloanfund:Ifyouarecurrentlyoperatingaloanfund,youshouldconsiderapplyingtotheCDFIFundforcertification.Thecertificationprocessisstraightforward 6 CDFI Fund Website, Op Cit

(checkatwww.CDFIfund.gov).Onceyoureceivecertification,youareeligibletoapplyforaTechnicalAssistanceAward(toallowyoutocreatethebusiness,marketingandmanagementplans)foryourCDFI.YoucanalsoapplyforaFinancialAssistanceAwardthatprovidescapitalforyourneworexpandedloanfund.DevelopmentTip:ManageExpenses:Managingyourincomeandexpensesisessentialforyourlongtermsurvival.

1. Partnershipswithotherrelatedlendingentitiesallowyoutoexpandyourmarketandcutdownonyourownexpensesintheareasofmarketing,loanprocessingandloanmanagement.

2. Loanlossesdecreasethesizeofyourloanpoolandloweryourpotentialincome3. Reservesimpactyourbusinesssuccess.Thesearefundssetasidethatdonotgenerate

income.4. Yourlendingguidelinesandapprovalsalsoimpactyoursuccess.Thegreaterrisksyour

fundincurs;thegreaterthepotentiallosses.5. Theexpensesformarketing,processingandmanagingasmallloanarethesameas

expensesforalargerloan.6. Partneringandsharingofloanmanagementandportfoliomanagementfunctionsarean

excellentmeansofmanagingandreducingexpenses.7. Ifyoualreadyhaveloanprocessingandmanagementexperience,youmaywanttomarket

thiscapacityandgenerateadditionalincomebymanagingfundsforpartnerorganizations.

COMMUNITYDEVELOPMENTEQUITYINVESTMENTFUNDSEconomicimprovementinlowincomecommunitiescannotbesolvedbydebtalone.Equityistheprimaryingredientthatattractsandsecuresdebtresourcesforcommunitydevelopmentprojectsandprograms.Thefollowingsectionbeginswithtraditionalequitysourcesandtheevolutionofnewerequityproductsandresources.Thisguidewilldiscussvariousformsofequity,theirsourcesanduseinthecontextofrcommunitydevelopmentorganizations.Note:Theendofthisdocumentincludesmoredetailsonfundingsources.Wearehighlightingtheonesbelowastheyareusedforequityincommunityeconomicdevelopmentprojects.Thisguideisforusebyorganizations:

1. Seekingtounderstandequityandthevariousformsittakes2. Seekingsourcesofequityfortheirprojects3. Seekingsourcesofequityfortheirinvestmentfund

Specificallywewilldiscuss:

1. Traditionaluseofpublicsectorequity2. Useofpublicsectortaxincentives3. Newersourcesofpublicsectorequity4. Privatesectorequity5. Communitydevelopmentorganizationsandinvestmentfunds

Traditionaluseofpublicsectorequity:CommunityDevelopmentBlockGrants(CDBG),UrbanDevelopmentAssistanceGrants(UDAG)andtaxincrementfinancingrepresentthemainfederalsourcesofdirectgrantsthathavesupporteddevelopmentineconomicallydistressedcommunities.Thesegrantfundsweretypicallyusedforlandassemblageandrelatedprojectdevelopmentcosts.Throughadevelopmentagreement,thelandwouldbetheequityprovidedbylocalgovernmenttosupportthefinancialsuccessoftheproject.Thesefundswereaugmentedwithadditionalgrantequitytoensuretheprojectwouldremaineconomicallyviableandattractconventionaldebt.“Public/privateventures”becamethetermthatbestdescribesthesymbioticrelationshipbetweenequity(frompublicsectorsources)anddebt(fromtheprivatesector).Thepublicinvestmentisequityandtookvariousequity/debtlikeforms.Thisequitycouldbestructuredlikealoan,butwassubordinatetotheconventionaldebtprovider(lender).Thissubordinationandotherfavorableconcessionsallowedconventionallenderstoviewthepublicinvestmentasequity.Somefavorabletermsincludestructuringtheinvestmentasaloan,howeverrepaidonlyiftherewasexcesscashfloworinterestpaymentswouldbereducedand/ordeferredaslongastheprojectmetcertaincommunitydevelopmentgoals.BothCDBGandtaxincrementfinancingaregreatsourcesforequity‐typefinancingneededtofillthefinancinggapbetweenconventionaldebtandequity.Locatingasourcetofillafinancinggapisthenumberonechallengeexperiencedbycommunitydevelopmentorganizationsdevelopingprojectsinthedistressedcommunitiesorneighborhoodstheyserve.OthertraditionalsourcesofinvestmentequitycomethroughtheSmallBusinessAdministration,specificallytheSmallBusinessInvestmentCompany(SBIC)andtheMinorityEnterpriseSmallBusinessInvestmentCompany(MESBIC)programs.Theseentitiesusetheirowncapitalandloan

guaranteesfromthegovernmentandmakeequityanddebtinvestmentsintobusinesses.TheyareregulatedbytheSmallBusinessAdministrationandareeligibletosellnotesorstocktotheSBAtoleveragetheirprivatecapital.Thesecompaniesaretypicallyprivatesectorbutarecloselytiedtolocalpublicsectorentities(throughboardmembershiporotherfinancialsupport).TheEconomicDevelopmentAdministration(EDA)providesasignificantamountofgrantfundsforcommunitydevelopmentprojectsthatcreatejobs.Oncefocusedoninfrastructure(roads,sewerandutilities),EDAhasexpandeditseffortsandinvestedinjobcreatingprojectssuchasshoppingcenters,businessincubatorsandjobcreatingservicefacilities.EDAmatcheslocalfunding.Inmostcases,EDAhasnotsubordinatedtoaconventionallender,creatingtheneedtousenon‐traditionalsourcesofdebt.Useofpublicsectortaxincentives:WiththeadventofLowIncomeAffordableHousingTaxCreditsin1986,adirectconnectionbetweentheinvestorcommunityandcommunitydevelopmentwasestablished.Inthisprogram,thetreasuryallocatestaxcreditstostatesbasedonapercapitarate.Statessubsequentlyallocatecreditstoprojectsbasedontheirestablishedcriteriaandfocus(moreseniorversusfamilyhousingorunitswithspecificamenitiessuchasmorebedroomsorcommunityfacilities).Oncetheprojectreceivesthecredits,theyaresoldtoinvestors(primarilyfinancialinstitutions).Thevalueofcreditsisequaltotheeligiblebasisoftheproject.Theinvestortakesthecreditstooffsetincomeovera10‐yearperiod.Thisinvestmentbecomesprojectequitythroughalimitedpartnershipagreementwheretheinvestoristhe99.99%limitedpartnerandthedeveloper(inmanycasesanon‐profitdevelopmententity)becomesa.01%managinggeneralpartner.Aftera15‐yearcomplianceperiod,theequityremainsintheprojectandthelimitedpartneris“bought‐out”foranominalfee.Thisequitycouldrepresentasmuchas80%ofthedevelopmentcostsfortheproject,creatingsubstantialcreditsupportforbanksandfinancialinstitutionstoprovidedebt.TheCommunityRenewalTaxReliefActof2000introducedNewMarketsTaxCredits(NMTCs)asatooltosupportnon‐housingcommunitydevelopmentbusinessesandcommercialrealestatedevelopmentactivities.NMTCisasmallercreditthatgeneratesonly18‐25%oftheprojectcosts.NMTCsareallocatedtointermediateentitiescalledCommunityDevelopmentEntities(CDEs)whichinturnallocatethecreditstoprojects.Theinvestorpurchasesthecreditsandusesthemoverafive‐yearperiodwhilethecomplianceperiodremainsatsevenyears.Thesetwotax‐basedprogramshavebeeninstrumentalinattractingprivateequityinvestmentforcommunitydevelopmentprojectsinlowincomecommunities.Inmanycases,thesesuccessfulprogramsspurredinterestandabetterunderstandingoftheseunderservedmarkets.Additionally,conventionallendinginstitutionsunderstoodthenecessaryingredientsofsuccessfulprojectswhichhaveresultedinotherinnovativeequitytypeinvestmentsforcommunitydevelopment(discussedinthenextsections).Newersources/usesofpublicsectorequity:Theearlyuseofpublicsectorfundstooktheformofgrantsandevolvedinto“debtlikeequity”wherefundingwasstructuredasaloanbutpaymentsweremadebasedonavailablecashflow(ortheinterestpaymentwasreducedand/ordeferred).TheseadjustmentsweremadetoadheretotherequirementsofLowIncomeHousingTaxCredits

(bytheInternalRevenueService),buthaveproventobeaneffectivemeansforlocalgovernmentstoberepaidiftheprojectremainseconomicallyviable.AnotherevolutioninfundinghascomethroughtheDepartmentofHealthandHumanServices,OfficeofCommunityService’sCommunityEconomicDevelopment(CED)Grants.Manyoftheearlygrantswereusedasdirectprojectequitybytheapplicantcommunitydevelopmentorganization.Projectsmustcreatejobs.Grantsareashighas$800,000.Projectsgenerallyincludedsocialventuresorcommercialrealestatedevelopmentprojects.Moreexperiencedcommunitydevelopmentlendingorganizationsusethegrantsasequityinvestmentstoattractorgrowjobcreatingbusinessesintheircommunities.Manyarestructuredas“debtlikeequity”andaresubordinatetothedebtproviderbutstructuredtoberepaid.Thisrepaymentallowsfundstorevolvetoanotherbusinessinvestment.Anyinterestincomeisusedtopayformanagementandorganizationalexpenses.Overtheyearstheseinvestmentfundshavegrownsubstantially,creatingsignificantpositiveeconomicimpactincommunities.Privatesectorequity:Overthelast20years,loanfundsandCDFIshavegrowninpopularityduetotheirsuccessinlendinginmarketsperceivedbyconventionallendersasbeingrisky.Atthesametime,theCommunityReinvestmentAct(CRA)createdpressureforfinancialinstitutionstolendandinvestinallmarketstheyserve.Earlybankinvestmentsintoloanfundstooktheformofgrants,butwhilecreditneedsgrew,grantswerelimited.CDFIsbecamemoresuccessfulandsophisticated,andenabledbankstobetterunderwriteandmeasuresuccess,allowingfinancialinstitutionstomakemoreloansandequityinvestmentsintoloanfundsandCDFIs.CRAfocusedtheiranalysisinthreeareaslending,investmentandservices,thusaddingincentivesformorelendingandinvestmentintoloanandinvestmentfunds(CDFIs).Fromtheperspectiveoffinancialinstitutions,fundingtoCDFI’soriginatesfromthreedifferentsourcesfromwithintheirorganizations:

1. Grants:Grantscomethroughthefoundationordirectlyfromthecorporation2. Loans:Loansoriginatethroughtheinstitution’slendingunit(itwillbestructuredasaloan

andissubjecttounderwritingstandardsandguidelinesthatlimitloansbasedondebt/equity,leverageratiosandloanlossrequirements.)

3. EquityInvestments:aseparatesourceoffundsforequitytypeinvestmentsthatarenotlimitedbylendingguidelines,andthereforehaveflexibilityontheratesandtermsoftheirinvestment.Mostinstitutionswillhaveinvestmentguidelinesfortheirproductandwillhavefavorable(low)rates.

GrantsandequityinvestmentsintoCDFIshavethemostflexibilityforCDFIs.CDFIscanusefundsasaloanoranequityproduct.Equity‐typeproductsallowlenderstostructurefinancingwhichcanaddressprojectfinancinggapswiththeusenontraditionallendingparameters.Howevertheriskforrepaymentincreases.Ifyoursourceoffundsisnotagrantandmustberepaid,youwillneedtouseyourfundsconservatively.Otherthanbanksandotherfinancialinstitutions,foundationsmakeequity‐typeinvestmentsintocommunityloanandinvestmentfundsthroughProgramRelatedInvestments(PRIs).

“Theevolutionofcorporatecivicalliancesandtheemergenceofneweconomicdevelopmentinitiativeshavebeeninfluencedbytheemergenceofseveraltrends.First,therehasbeenasignificantincreaseoverthelastseveralyearsinsociallyresponsibleinvesting–fromtheadventofsociallyconsciousmutualfundsatmanyofthemajorbrokeragehousestoasignificantincreaseinindividualinvestmentsinthesefunds.Second,venturephilanthropyhasbecomeanaccepted,expandingphenomenon,asshownbytheincreaseingrantsandProgramRelatedInvestmentsmadebyfoundationstoincreasenonprofitcapacitiestoobtainandmanagefunding.Third,corporationshavealsointensifiedtheirphilanthropicefforts,particularlyoverthelate1990swhentheeconomywasmorerobust,asevidentinthefactthatmanyFortune500companieshavecreatedsubsidiariesfocusedonprovidingmanagementexpertisetononprofitleadersaswellasmakingmonetaryinvestmentsintheseorganizations.Theseefforts,coupledwithanalwaysstrongprivatesectorprofitmotive,haveledbusinessleaderstoembracethepotentialofdoublebottomlineinvesting–thenotionthatbusinessescandowellanddogoodatthesametime.”7

7 Hosier, Amy L.W., “Corporate Civic Investment Funds: New Models for Community Development Finance?”, Federal Reserve , March 2003 website: www.federalreserve.gov

COMMUNITYDEVELOPMENTFINANCIALINSTITUTIONS(CDFIs)Microlendingprograms,mostCDLFsandcreditunionsareeligibleentitiesundertheCDFIprogram.NOTE:(PleaserefertotheCommunityDevelopmentFinancialInstitution(CDFIs)Guideforspecificdetails).

ThekeyprogramsincludeCDFICertification,TechnicalAssistance(TA)AwardsandtheFinancialAssistance(FA)Awards.TheseprogramsaredesignedtoenableCDFIstoleverageprivatecapitaltomeetthedemandforaffordablefinancialproductsandservicesineconomicallydistressedcommunities.

ThemissionoftheCommunityDevelopmentFinancialInstitutionsFundisto“expandthecapacityoffinancialinstitutionstoprovidecredit,capitalandfinancialservicestounderservedpopulationsandcommunitiesintheUnitedStates”8TheCDFIFundhasseveralprogramsthatenhancesaccesstocapital.Uponreceivingcertification,CDFI’sareeligibletocompetefortechnicalassistancegrants,capitalgrants,NewMarketsTaxCreditsaswellasothertargetedincentiveprograms.TheCDFIdesignationallowslendingprogramsaccesstocompeteforCDFIresources,buttheseresourcesareinveryhighdemand.Sincethestartoftheprogramin1994,thecompetitivebarhasrisendramaticallyandorganizationsreceivinggrantshavesignificantexperienceinoperatingasuccessfulloanfundorconductinglendingactivities.Therefore,wehighlyrecommendthatorganizationscloselystudytheapplicationguidelinesfoundatwww.cdfifund.gov.

CDFIPROGRAMBENEFITS

TheCDFIcertificationisarequirementthatwillallowyoutoaccessCDFIprogramfunds.Theseprogramsinclude:Note:SourcematerialforthissectionisfromtheCDFIwebsiteat:www.cdfifund.gov.Thewebsiteincludesannualchangesintheprogramorspecialprograms,forexamplethe2011applicationprocessincludedtheHealthyFoodFinancingInitiativethatmade12awardsfor$25million.ThegoalofthisprogramistouseCDFIcapacitytomakeinvestmentsinarangeofhealthfoodprojectsservingfooddesertsincludinggrocerystores,mobilefoodretailers.Farmersmarkets,cooperatives,cornerstores,bodegasorotherfoodrelateditems(includinghealthfoods).

CDFIFinancialAssistanceandTechnicalAssistance:TobeeligibleforanFAaward,aCDFImustbecertifiedbytheCDFIFundbeforeitappliesfortheaward.ProspectiveapplicantsthatarenotyetcertifiedmustsubmitaseparatecertificationapplicationtobeconsideredforFAduringafundinground.

Bothcertifiedandnon‐certifiedCDFIsareeligibletoapplyforTAawards.However,non‐certifiedorganizationsmustbeabletobecomecertifiedwithintwoyearsafterreceivingaTAaward.TheTAawardswillcoverexpensesneededtobuildthecapacityoforganizationstobecomeeligibleforCDFIdesignation.

2011CDFIAwardCategories:

8 Community Development Financial Institutions Fund “CDFI Certification Application”, Department of Treasury, June 2007, pg 4

1. FinancialAssistance:CertifiedCDFIsmayreceiveawardsintheformofgrants,loans,equityinvestments,depositsandinsuredcreditunionshares

2. TechnicalAssistance:Non‐certifiedCDFI’smayapplyforTA(notboth)tobuildorganizationalcapacity.Ifyouhavenotbeencertified,TAcouldhelpyougetcertified.Thesefundsdonotrequirematchingfunds.

3. HealthyFoodsFinancingInitiative:AwardstoCDFIstoaddresstheneedforhealthyfoodsintheirmarkets(USDAandHHSsupport)

CDFIApplicationforTechnicalAssistanceAwards:ThisawardsupportsyourorganizationtowardsbuildingsystemsandcapacitytoapplyfortheFinancialAssistanceAwards.CDFIApplicationforFinancialAssistanceAwards:Thisawardisagrantthatcanbeusedtoimproveorganizationalsystemsandasseedcapital(orexpansioncapital)foryourloanfund.Thisisagrantandcanbeusedforyourloanfundat0%interest.SummaryStepstoBecomingaCDFI:TogainCDFIdesignationthestepsarerelativelysimple.Theworkisintheplanningandapplicationprocess.Process:

1. TechnicalAssistancetodevelopingtheorganizationandprogramstructure2. ObtainCommunityDevelopmentEntity(CDE)designation3. Financingparticipation/partnership(strategytogainexperience)4. ApplicationforTechnicalAssistanceAwards5. DevelopingtheCDFIorganizationalandprogramstructure6. ApplyforCDFIstatus7. RequestforCDFIfunding8. Otherinvestmentsandmatches9. Makeloans10. Manageloans

OTHERNOTES:ServiceGaps:OnecriticismofCDFIlendingprogramshasbeenthe“unevenlandscape”thatresultsingapsinservice.MosteffectiveCDFIsoperateinsmallgeographies(communities,citiesandcounties)whilelargerentitiesmightservestatesormulti‐stateareas.Someofthelargerlendinginstitutionsmaybenationalbuttheymaynotserveallcommunitieswiththesamelendingproducts.SomecommunitiesareservedbyCDFIswithlendingproductsthatdonotmeetlocalneeds.ManyCDFIsserveonlyonesegmentoflendingactivitysuchasbusinesses,realestateorpersonal,whichmaynotmatchwithneededcreditserviceinagivenarea.ThisissuepresentsanopportunityforaCDFItoexpandorforanewCDFItoemerge,especiallyifthereisneedandinterestamongsttheresidentsandconstituencyaffectedbythelackofcapital.

SOURCESOFFUNDS:

1. Federal,StateandLocal

a. SmallBusinessAdministrationi. MicroloanProgram:Fundstononprofitcommunity‐basedMDOswithloans

cappedat$35,000recentlyincreasedto$50,000pursuanttotheJobsAct.Theaverageloanis$13,000.ForFY2010,$25millionwasallocatedtotheprogram.

ii. ProgramforInvestmentinMicro‐entrepreneurs(PRIME):In2010therewere92grantsmadefroma$8milliondollarpool.Grantsupto$250,000canbeawardedtoMDOstofunddirectassistancetocustomersoffundsortobuildtheMDOsownresourcesorcapabilities.

iii. CommunityAdvantageProgram:TheCommunityAdvantageProgramisathree‐yearpilotprogramthatwillallowMDOsandotherlendersthattargetunderservedpopulationstoaccesstheSBA7(a)program(withloansupto$250,000).

iv. The7(a)LoanProgramincludesfinancialhelpforbusinesses.Thesespecialrequirementsare:loanproceedsmaybeusedtoestablishanewbusinessortoassistintheacquisition,operation,orexpansionofanexistingbusiness.

Forexample,fundsareavailableforloanstobusinessesthathandleexportstoforeigncountries,businessesthatoperateinruralareas,andforotherveryspecificpurposes:

1. SpecialPurposeLoans:BusinessesimpactedbyNorthAmericanFreeTradeAgreement,supportforEmployeeStockOwnershipPlansandpollutioncontrol.

2. ExportLoanPrograms3. RuralBusinessLoans4. AdvantageLoanInitiative:Focusonunderservedcommunities.5. CommunityAdvantageApprovedLenders:Pre‐approvedorganizations.6. Express&PilotPrograms:Streamlinedexpeditedloanproceduresfor

specifictargetborrowers.v. The504LoanProgramprovidesapprovedsmallbusinesseswithlong‐term,

fixed‐ratefinancingusedtoacquirefixedassetsforexpansionormodernization.504loansaremadeavailablethroughCertifiedDevelopmentCompanies(CDCs)whichareSBA'scommunitybasedpartnersforproviding504Loans.504LoansaretypicallystructuredwithSBAproviding40%ofthetotalprojectcosts,aparticipatinglendercoveringupto50%ofthetotalprojectcosts,andtheborrowercontributing10%oftheprojectcosts.Inspecialcircumstances,aborrowermayberequiredtocontributeupto20%ofthetotalprojectcosts

b. DepartmentofTreasury:CDFIFundi. CDFICertification:CertificationProgramforloanfundstobecomeeligibleto

applyforCDFIprogramsii. TechnicalAssistance:GrantsallowcertifiedCDFIsandestablishedentities

seekingtobecomecertifiedtobuildtheircapacitytoprovideaffordablefinancialproductsandservicestolow‐incomecommunitiesandfamilies.Grantsmaybeusedforawiderangeofpurposesincludingequipment,materials,orsupplies;forconsultingorcontractingservices;topaythesalariesandbenefits

ofcertainpersonnel;and/ortotrainstafforboardmembers.TheCDFIFundmakesawardsofupto$100,000

iii. FinancialAssistance:Awardsofupto$2millionaremadetocertifiedCDFIsundertheFAcomponentoftheCDFIProgram.ACDFImayusetheawardforfinancingcapital,loanlossreserves,capitalreserves,oroperations.FAawardsaremadeintheformofequityinvestments,loans,deposits,orgrants,andtheCDFIisrequiredtomatchitsFAawarddollar‐for‐dollarwithnon‐federalfundsofthesametypeastheawarditself.

iv. OtherPrograms:OtherCDFIFundprogramsinclude:1. BankEnterpriseAward(BEA):Thisprogramprovidesfinancial

incentivestoinstitutionstoexpandinvestmentsinCDFIsandtoincreaselending,investment,andserviceactivitieswithineconomicallydistressedcommunitiesoveraspecifictimeperiod.

2. CapitalMagnetFund(CMF):providecompetitivelyawardedgrantstoCDFIsandqualifiednonprofithousingorganizations.CMFawardscanbeusedtofinanceaffordablehousingactivitiesaswellasrelatedeconomicdevelopmentactivitiesandcommunityservicefacilities.Awardeeswillbeabletoutilizefinancingtoolssuchasloanlossreserves,loanfunds,risk‐sharingloans,andloanguaranteestoproduceeligibleactivitieswhoseaggregatecostsareatleasttentimesthesizeoftheawardamount.

3. FinancialEducationandCounseling(FEC):ThroughtheFECPilotProgram,theCDFIFundprovidesgrantstoeligibleorganizationstoenablethemtoprovidearangeoffinancialeducationandcounselingservicestoprospectivehomebuyers

4. NewMarketsTaxCredits:TheNMTCProgramattractsinvestmentcapitaltolow‐incomecommunitiesbypermittingindividualandcorporateinvestorstoreceiveataxcreditagainsttheirFederalincometaxreturn.Thisisinexchangeformakingequityinvestmentsinbusinessesandcommercialprojectsthatcreatesjobsinlowincomecommunities.NOTE:TheNMTCprogramhasbecomeaveryimportanttoolforCommunityEconomicDevelopment.PleasereviewtheseparateGuideonNewMarketsTaxCreditsformoredetails.

5. NativeAmericanCDFIAssistanceProgram(NACA):FocusedprogramsupportingactivitiesforNativeAmericancommunities

6. CertificationforCommunityDevelopmentEntities(CDE):BenefitsofbeingcertifiedasaCDEincludebeingabletoapplytotheCDFIFundtoreceiveaNewMarketsTaxCredit(NMTC)allocation.

c. UnitedStatesDepartmentofAgriculture:i. RuralMicroenterepreneurAssistanceProgram(RMAP):Maximumloan:

$500,000.Lowinterest,20yearloanswith2‐yeardeferralofpayments,tocapitalizearevolvingmicroloanfund.Themicrolendermustestablish&maintaina5%lossreservefromtheirownfunds.Loanproceedsaretobeusedforrelendingasfixedratemicroloans(≤$50,000)toruralmicroentrepreneurs.

ii. RMAPTechnicalAssistanceGrants:($100,000maximumsize)toallowamicrolendertoprovidetechnicalassistancetotheirmicroloanborrowers.Theycanpayadministrativeexpensesofthemicrolender,butnotmorethan10%ofthegrant.MaximumTAgrantawardis≤25%ofmicrolender’sRMAPloanportfolio.

iii. RMAPEnhancementGrants($25,000maximumsize)toallowamicrolendertoincreaseitscapacitytoserveruralmicroenterprises.EnhancementgrantawardsarenottiedtotheoperationofanestablishedRMAPloanfund.RMAPgrantscannotprovidemorethan75%ofthecostoftheproject.

d. HealthandHumanServices,OfficeofCommunityServices,CommunityEconomicDevelopment:CommunityEconomicDevelopmentGrants:discretionarygrantfundstoCommunityDevelopmentCorporations(CDC)forwell‐planned,financiallyviable,andinnovativeprojectstoenhancejobcreationandbusinessdevelopmentforlow‐incomeindividuals.Upto$800,000isavailableforprojectsthatincluderevolvingloanfunds,realestatedevelopmentandbusinessstartupandexpansion.

e. DepartmentofHousingandUrbanDevelopment:i. CommunityDevelopmentBlockGrants(CDBG):Microloanfundingisaneligible

activityundertheCDBGprogam.UseoffundsisdeterminedbycitizensinputintotheCDBGprocessbytheparticipatingjurisdiction(localorstategovernment).ManyjurisdictionshaveallocatedfundsforMDOsupportandalltypesofsmallbusinessactivities.

ii. CommunityServiceBlockGrants(CSBG):LoanfundsarealsosupportedthoughCSBGfundingthrougheligiblestateandlocaljurisdictions.MostofthelocaljurisdictionsarecommunityactionagenciesoralocalgovernmentaffiliatethatdeterminesuseofCSBGfunds.

2. FoundationsandPrivateSector:a. Grants:Foundationshavebeenastrongsupporterofmicroenterpriselendingand

development.Mostofthesupportisconductedonarelationshipbasis.b. Investments:Toagreatdegree,banksandfinancialinstitutionshavemadeequitytype

investmentsintoloanfunds,primarilyCDFIs.Theyhavealsoactivelyprovideddepositsincreditunions.ProgramRelatedInvestmentshavebeenmadebylargernationalfoundationsinthepastandfocusedonspecificindustrysupport.TheCaliforniaEndowmenthasrecentlymadeasubstantialinvestmentintoafundtosupportthedevelopmentofmarketsin“fooddeserts”aspartofnational“healthyfood”initiatives.ThefundisinpartnershipwiththeNCBBank(previouslyknownastheNationalCoopBank).

DEVELOPMENTTIPS:

Considerwhatcommunityneedsareanddesignthelendingorinvestmentactivityappropriately.Considerwhatresourcesyouhaveorcanaccesstohelpdeterminesizeandscopeofyourprogram.Somekeydevelopmenttipstorememberinclude:1. Ifyouarestartinganewfund,dotheinitialinvestigativeresearchandconceptpaperto

determineiftheprojectisfeasible.Theconceptpaperwillalsobeyourbasetooltopresenttopotentialfundingandresourcepartnersandbecomesthebasisforyourbusinessplan.Asyougatherdata,yourconceptpapershouldbecontinuallyupdated.Thisinformationwillbecomethebasisofyourbusinessplan.

2. Insteadofstartingyourownfund,considerpartnershipstobringtheresourcetoyourcommunityortocreateaspecializedfundthatcanbemanagedbyanexistingCDFIorloanfund.Thismaybeanintermediarystepforyoutogainexperienceifyoulaterwanttocreateandmanageyourownfund.

3. BecomeaCommunityDevelopmentEntity(CDE)andgetCDFICertification.Thisisespeciallytrueifyourorganizationhasalendingprogram.

4. TheCDFIdesignationonlyallowsyoutoapplyforCDFIFundresources.Theyareverycompetitive.Itisimportanttobuildyourcapacityandtrackrecord.

5. OnceyougetaCDFIdesignationmakesureconventionallendinginstitutionsarepartofyourplanning/developmentprocess.Enlistthemassupporters(onyourboard,advisoryboardorprojectcommittee).Remember,conventionalfinancialmarketshaverealizedtheimportanceandsuccessesofCDFIsandseekCDFIstoplaceinvestments.

6. Yourboardofdirectorsandloancommitteeareveryimportanttothegrowthandsuccessofyourloanfund.

a. Board:CreationoftheBoardofDirectorsisaveryimportantstepthatbuildsthefoundationforasuccessfulloanfund.

i. Properbalancebetweenmission(helpingimprovedistressedcommunities)andrisk(lendingguidelinesandrequirements)ismaintainedbyboardrepresentation.

ii. Fundraising:Fundraisingisacriticalneedforloanfundsandhavingrepresentativesfromentitiesthateitherfunds/investsinloanfundsorareinpeerindustriesthatcansupportloanfundactivitiesiscritical.

iii. Management:Expertiseinlending,businessorlawprovidesthenecessaryinputandoversightoflendingactivitiesandoverallsuccess.

b. LoanCommittee:Theloancommitteeshouldinmanywaysmirrorthebalanceoftheboardofdirectorsbuthavefocusonmanagementissues.Thecommitteemusthavemembersversedinunderstandingofthelendingguidelinesandpoliciesofthefund.Experiencedlenderscantypicallyberecruitedfromfinancialinstitutionsthatinvestorlendintothefund.

7. ManageExpenses:Managingyourincomeandexpensesisessentialforyourlongtermsurvival.a. Partnershipswithotherrelatedlendingentitiesallowyoutoexpandyourmarketand

cutdownonyourownexpensesintheareasofmarketing,loanprocessingandloanmanagement.

b. Loanlossesdecreasethesizeofyourloanpoolandloweryourpotentialincomec. Reservesimpactyourbusinesssuccess.Thesearefundssetasidethatdonotgenerate

income.

d. Yourlendingguidelinesandapprovalsalsoimpactyoursuccess…thegreaterrisksyourfundincurs;thegreaterthepotentialisforlosses.

e. Theexpensesformarketing,processingandmanagingasmallloanarethesameasexpensesforalargerloan.

f. Partneringandsharingofloanmanagementandportfoliomanagementfunctionsareanexcellentmeansofmanagingandreducingexpenses.

g. Ifyoualreadyhaveloanprocessingandmanagementexperience,youmaywanttomarketthiscapacityandgenerateadditionalincomebymanagingfundsforpartnerorganizations.

8. AdditionalCapital:TheCDFIFinancialAssistanceAwardisagrantthatcanstartyourlendingprogram,butyoushouldlookatitasanopportunitytolocateadditionalmatchingfundstoexpandyourloanpool.

Itisimportanttodeterminewhointhemarketplace,hasinterestinsupportingyourlendingactivities.

Yourboard,advisoryboard,orprojectcommitteeshouldhavememberswhorepresentfinancialinstitutions,localbusinessesandcorporations,andlocalgovernmentandcommunityleaders.Theycanbecomeyourspokesperson(s)andcanconvenemeetingswiththeirpeerstomarketinterestinyourfund.

Engagementanddiscussionswiththebankingregulators;FederalDepositInsuranceCorporation(FDIC),OfficeoftheComptrollerofCurrency(OCC)andFederalReserveBank(FRB)regardingyourfundareaveryimportantactivity.Theseinstitutionscanbeanimportantresourceforknowingwhomightbeinterestedinsupportinglendingactivitiesorareinterestedinyourcommunity.Theyarealsogreatresourcesforconveningmeetingswithfinancialleaderstogenerateinterestinyourfund.

9. EquityInvestment:Asnotedintheequityinvestmentsection,oneofthebestsourcesforequityinvestmentcapitalisthroughtheDepartmentofHealthandHumanServices,OfficeofCommunityServices,CommunityEconomicDevelopmentGrants.Organizationscaninvestgrantproceedsasequityintoanewbusinessbutpreferablyanexpandingbusinessthatwillmeetjobcreationrequirements.Theinvestmentcanbedesignedasequitywithrepaymentrequirements.Anyprinciplerepaymentcouldagainberecycledintobusinessesandinterestusedtopayforfundmanagementandoperatingexpenses.

FinalNote:

Communitydevelopmentloanfundscanspecializeinitsmarketandservices.Becomingaloanfundisnoteasyandrequiresastrongcommitmentfromtheorganizationandthemembersofthedevelopmentteam.WithexperiencethenaturalprogressionistogainCDFIcertificationandaccessitsmanyresources.Withthisaddedcapacity,organizationscanbecomeequityinvestorsorcanexpandtheirservicestotheentirecommunitybycreatingacreditunion.Thegoalcanbeaccomplishedwiththesupportofthecommunity,localgovernmentandinterestedfinancialinstitutions.Itismostimportanttohavestaffdedicatedtotheprojectandiftheydonothavetheexpertise,locateresourcestosupportandguidetheeffort.Thisdocumentisintendedtobeaguidethatoutlinessomeofthekeyissuesandidentifiespossiblesolutionsandsteps.Itisnotintendedtobeyoursourcesinceeveryprojecthasitsownissues,concernsandpeculiaritiesanditsownuniquesolutions.Thedocumentisnotintendedtoencourageanyorganizationintoprojectdevelopmentbutonlytolayoutsomeofthekeystepsandissuesoncethedecisionismadetoproceed.

APPENDIXAFORMOREINFORMATION:ResourcesWebsites:

OpportunityFinanceNetwork:(www.ofn.org)“OpportunityFinanceNetwork(OFN)isanationalnetworkofcommunitydevelopmentfinancialinstitutions(CDFIs)investinginopportunitiesthatbenefitlow‐income,low‐wealth,andotherdisadvantagedcommunitiesacrossAmerica.

OFNMembersareperformance‐oriented,responsibleinvestorsthatfinancecommunitybusinesses,sparkingjobgrowthintheareasthatneeditmost,anddeliveringbothsoundfinancialreturnsandrealchangesforpeopleandcommunities.

OurNetworkhasoriginatedmorethan$23.2billioninfinancinginurban,rural,andNativecommunitiesthrough2009.Withcumulativenetcharge‐offratesoflessthan1.4%,wehavedemonstratedourabilitytolendprudentlyandproductivelyinunconventionalmarketsoftenoverlookedbyconventionalfinancialinstitutions.”

CoalitionofCommunityDevelopmentFinancialInstitutions(CDFICoalition):(www.CDFI.org)“Formedin1992asanad‐hocpolicydevelopmentandadvocacyinitiative,theCoalitionofCommunityDevelopmentFinancialInstitutions(CDFICoalition)istheleadnationalorganizationintheUnitedStatespromotingtheworkofcommunitydevelopmentfinancialinstitutions(CDFIs).Throughitsmemberorganizations,theCoalitionrepresentsCDFIsworkinginall50statesandtheDistrictofColumbia.ThisnationalnetworkofCDFIsincludescommunitydevelopmentloanfunds,communitydevelopmentbanks,communitydevelopmentcreditunions,microenterpriselenders,communitydevelopmentcorporationsandcommunitydevelopmentventurecapitalfunds.TheCDFICoalitioncoordinatesindustrywideinitiativestoincreasetheavailabilityofcapital,creditandfinancialservicestolow‐incomecommunitiesacrossthenation.”

CommunityDevelopmentFinancialInstitutionsFund:(www.cdfifund.gov)“Throughmonetaryawardsandtheallocationoftaxcredits,theCDFIFundhelpspromoteaccesstocapitalandlocaleconomicgrowthinurbanandrurallow‐incomecommunitiesacrossthenation.

Throughitsvariousprograms,theCDFIFundenableslocallybasedorganizationstofurthergoalssuchas:economicdevelopment(jobcreation,businessdevelopment,andcommercialrealestatedevelopment);affordablehousing(housingdevelopmentandhomeownership);andcommunitydevelopmentfinancialservices(provisionofbasicbankingservicestounderservedcommunitiesandfinancialliteracytraining).

CaliforniaAssociationforMicroEnterpriseOpportunity(CAMEO):(www.microbiz.org)“CAMEO’smissionistopromoteeconomicopportunityandcommunitywell‐beingthroughMicroEnterprisedevelopment.

Ourmemberorganizationsprovideentrepreneurswithsmallbusinessfinancingsuchasloansandcredit,technicalassistanceandbusinessmanagementtraining.

AsCalifornia’sstatewideMicroEnterpriseassociation,CAMEOisthevoiceforMicroEnterpriseinCalifornia.Weexpandresourcesandbuildingcapacityforitsmemberorganizations–over160lenders,trainingprograms,jobcreators,agenciesandindividualsdedicatedtofurtheringMicroEnterprisedevelopmentinCalifornia

NationalCommunityReinvestmentFund(CRF,USA):(www.crfusa.com):“CommunityReinvestmentFund,USA(CRF)helpschangethelivesofpeoplelivingineconomicallydistressedcommunitiesacrossthecountry.Wesupplycapitaltolocalcommunitydevelopmentlenderssotheycanmeetgoalslikethese:

• Growsmallbusinesses• Increaseaffordablehousing• Createandpreservejobs• Buildchildcarecenters• Developcommunityfacilities

Atthesametime,weenablefinancialinstitutions,socially‐motivatedinvestors,andaccreditedindividualstoreachtheirsocialinvestmentgoals.CRFoperatestheleadingnationalsecondarymarketforcommunityandeconomicdevelopmentloans—amarketCRFpioneered.Wepurchaseeconomicdevelopmentandaffordablehousingloansfromcommunitydevelopmentlenders.Wethenpoolthemintoasset‐backeddebtsecuritiesandNewMarketsTaxCredit(NMTC)investmentfunds,whichweprivatelyplacewithinstitutionalinvestors”FORMOREINFORMATION:Websites,OrganizationalExamplesNationalSpecializedFund:

LowIncomeInvestmentFund(LIIF):(www.liif.org)“LIIFisacommunitydevelopmentfinancialinstitution(CDFI)thatprovidesinnovativecapitalsolutionsthatsupporthealthyfamiliesandcommunities.AsaCDFI,LIIFinvestsinprojectsthathavehighsocialvaluebutmaynotbeabletoaccesstheservicesofferedbytraditionalfinancialinstitutions.Inthisway,LIIFconnectslowincomecommunitieswiththecapitalmarkets.LIIFoffersawiderangeofproducts,includingcommunitycapitalloans,NewMarketsTaxCredits,grantsandtechnicalassistance.LIIF’smission‐drivenapproachcombinedwithitsmarketandindustryknowledgehavedistinguisheditasaCDFIthatcreatesflexible,affordablefinancingsolutionsthatworkforcommunityorganizationsandinvestors.In2011,LIIFinvestedover$1.1Billion.”

NCBCapitalImpact(NCB,formerlytheNationalCoopBank):(www.ncbcapitalimpact.org)“AsanationalnonprofitorganizationandacertifiedCommunityDevelopmentFinanceInstitution,NCBCapitalImpactimprovesaccesstohigh‐qualityhealthandeldercare,healthyfoods,housing,andeducationinlow‐incomecommunities.Ourimpactisbuiltonadiverseandextensivenetworkofalliances,ourdepthofexperience,andacooperativeapproach.Wepartnerwithpublicandprivateorganizationsthatarelike‐mindedinmission,anddedicatedtolong‐termsuccess.NCBCapitalImpacthasdeployed$1.6Billioninloans,investmentsandassistance.”

RegionalCDFIs:

ClearinghouseCDFI:(www.clearinghousecdfi.com):“AtClearinghouseCDFIwebelieveinprovidingequalaccesstocreditinneighborhoodsofallincomelevelsandethnicities.Wespendthe

timeandenergyrequiredtofindcreditworthyborrowerswhoseprojectscreateassetsinthecommunity.Theseborrowers,becauseoftheiruniquecircumstances,arerejectedornotevenconsideredbytraditionallenders.Communitydevelopmentlendingmustbeprofitableinordertobesustained.Aswithconventionallenders,wecarefullyevaluateeachapplicant’sabilitytorepaytheloan.Unliketraditionallenders,wedonothavepredefinedloanprograms.Weanalyzeeachloanapplicationindividually.Everyloanwemakebenefitsthecommunityinameasurableway.ClearinghouseCDFIisaCommunityDevelopmentFinancialInstitutionservinglow‐incomecommunitiesandfamiliesthroughouttheStateofCalifornia.Throughourtwolinesofbusiness,CoreandNMTClending,wehavefunded$760millioninloansandequityinvestmentsinlow‐incomecommunities.Our1,232loanshaveassistedborrowerssuchasnonprofitsandothercommunitydevelopmentgroupstocreate3,005affordablehousingunits,enable846first‐timehomebuyers,create4,270constructionandpermanentjobs,andserve215,000clientsoflow‐incomecommunitiesannually.”

CoastalEnterprisesInc(CEI):(www.ceimaine.org)“CEIin2012isaMaine‐basedorganizationwithstrategicexpansionsoutsideofMaine,servingmoreruralcommunitiesdirectlyorthroughalliancesandhavinganevergreaterimpactonpoverty,whichisdocumentedwithdata.Theorganizationhasahighfinancialsustainabilityratio,thankstonewandexpandedsourcesoffundsthroughprivategiving,publicfunds,andincomefromfundsandventurecapital.CEIhasametricforlookingatthebalanceofthe3Es—economy,equityandenvironment—throughallinitiatives,andhasagroupinplacemeasuringimpact,scanningforopportunities,anddevelopingpolicy.”

EquityInvestment:

SeeCoastalEnterprises(Above)

NorthwestSideCommunityDevelopmentCorporation(NSCDC):(www.nwscdc.org):“ThenorthwestsideofMilwaukeewillbetransformedintoapreferreddestinationforbusinessesandresidents.TheNorthwestSideCommunityDevelopmentCorporationwillberecognizedastheorganizationthatleadsthattransformation.Throughoutits25‐yearhistoryTheCDChasinnovatedandadaptedtochangesinthecommunityandeconomicdevelopmentlandscape.Theinnovation,alongwiththecontinuityofmanagementandastrongboardofdirectorshasallowedtheCDCtothriveinthefaceofadversity,evenhostilitytowardsthefield.TheCDCcreatedMetroworks,Milwaukee'sfirstbusinessIncubatorwiththehelpofCBEDfundsin1986,creating90businessesduring17yearsofoperation.Inthelate1990stheCDCboardandmanagementdevelopedandbegantoimplementanewbusinessmodelforcommunityeconomicdevelopment.Thenewmodelemphasizesleveragingpartnershipsandcollaboratinginbusinesscreationandrealestatetransactionsratherthanowningandmanagingproperty.WiththisnewmodeltheCDChaspioneeredeffortstopartnerwithlargebusinessessuchasDRSPowerandControlsTechnologies.Since2000,asaresultofthenewcollaborativestrategy,theCDChaslentover$3.2milliondollarstoseveralmajorcatalyticprojectsontheNorthSidecreatingover500jobsincluding:

• HelpingtofinancethesecondphasedevelopmentatMidtownCenter

• AssistingwithfinancingoftwoLena'sandoneKohl'sgrocerystore• CreatingtheMilwaukeeTechnologyIncubatorCenterwithinDRSPowerControlsand

Technologies• Creatingathird,smallerretaildevelopmentplanwithLena'satMidtownCenter• Financingthestart‐upofParadigmSensors,thefirstminorityowned"greentech"company

intheStateofWisconsin• CreationofaRevolvingLoanFundfor30thStreetIndustrialCorridorbusinesses

CommunityBasedFunds:

FresnoCommunityDevelopmentFinancialInstitution(FCDFI):(www.fresnocdfi.org)“FresnoCDFIisacomprehensivefinancialservices,training,andassetdevelopmentinstitutionforlow‐andmoderate‐incomeresidentsandbusinesspersons.SinceourinceptioninMay2008,ourprofessional,seasoned,andmulti‐lingualstaff–experiencedinmicro‐finance,creditcounseling,businessplandevelopment,andadvocacyforlow‐incomefamilies–hashelpedhundredsofentrepreneursrealizetheirdreams.Weservea9‐countyregioninCentralCalifornia.”

PeopleIncorporatedFinancialServices:(www.peopleinc.net)“PeopleIncorporatedFinancialServiceswascreatedin2001toaddressbusinessdevelopmentfinancingneedsthroughoutVirginia.ThisPeopleIncorporatedaffiliateadministersthemicroenterprisedevelopmentandsmallbusinessfinancingactivitiesforPeopleIncorporatedAsaCommunityDevelopmentFinancialInstitutioncertifiedbytheU.S.DepartmentofTreasury,PeopleIncorporatedFinancialServicesoffersloans,developmentservicesandfinancialproductstosmallandemergingbusinesses.PeopleIncorporatedFinancialServicesworkstostrengthenlocaleconomiesin17‐jurisdictionserviceareas.

PeopleIncorporatedFinancialServiceshasextensiveexperienceprovidingsmallbusinessandmicroenterprisedevelopmentandlendingservicesinlow‐incomecommunities,andistheonlyCDFIheadquarteredinruralVirginia.Sinceitsinceptionin1992,thePeopleIncorporatedFinancialServicesloanportfoliohasgrowntoinclude308microenterpriseandbusinessloans,whichtodatehavecreated475jobsandretained180more.”

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