CDFI Community Development Financial Institution

Sometimes a bank loan is an option. Other times, a better fit is a Community Development Financial Institution, also called a CDFI. CDFIs are local community lenders mission-driven, certified by the US Treasury Department that provide financial advice and capital all towards expanding economic opportunities in low-income communities. They specialize in funding loans to small businesses, affordable housing, and nonprofit organizations --- primarily serving low and moderate-income communities. CDFIs receive money to lend from a number of sources, including government grants, foundations, individuals and banks. In order to provide another option for those that have been turned down by traditional banks.
So how does it work? Let’s say you want to expand your existing business. You may need capital to purchase equipment or hire more people but may not qualify for a traditional bank loan. What can you do? First, see if there’s a CDFI in your area.
Then, make an appointment. Be ready to talk about how a loan will benefit both your business and community. It’s a journey and may include a few conversations, so be prepared to set aside some time. Before you know it, your business is growing, and you’re hiring more staff, purchasing new equipment and serving more customers.
CDFIs have varying lending standards. Unlike traditional banks CDFI’s will finance startups and are known for creating alternative ways in which to prove credit worthiness. With most traditional financial intuition’s banks are known for sticking to the numbers: credit score, tax returns, balance sheets, income statements and the amount of capital the borrower already has invested in the business. Community lenders consider some of the same metrics, but they also look at the borrower as a whole.
Many instances completing technical assistance training and building a relationship give the participant a greater opportunity for having their loan funded.
CDFI’s strive to understand the entire picture through there underwriting processes there is a better chance for getting financed through their programs.