When you’re looking for a small business loan, the first place you’ll likely go is your bank. One option you might not have considered? Community Development Financial Institutions, or CDFIs.
These not-for-profit financial institutions are dedicated to helping small businesses succeed by offering flexible access to capital and resources. When you get a loan through a CDFI, it unlocks technical assistance on everything from financial management to marketing and more.
Learn more about CDFIs and how you can work with them to propel your business forward.
What is a Community Development Financial Institute?
Community Development Financial Institutions, or CDFIs, are mission-driven, community-based, lenders that are certified by the US Treasury. A CDFI can be a bank, credit union, loan fund, or venture capital fund. They were created from the lending reforms enacted in the late 1970s to address the inequities in financing for small businesses. Today, there are more than 1,300 certified CDFIs across the country.
All CDFIs share a mission of helping small businesses that aren’t able to qualify for traditional financing. This could be due to issues such as a lack of credit history or a shorter length of time in operation (as is the case with start-up and early-stage businesses).
By making it easier for business owners to get approved for loans, CDFIs help small businesses launch and grow, creating and maintaining jobs throughout communities across the US.
CDFIs also provide technical assistance and build ongoing relationships with their borrowers. As your business grows, your CDFI will work with you throughout the term of your loan to get your business ready to qualify for bank financing. You’ll get resources to build your credit, improve your financials, and support your operations.
These are just a few of the benefits of working with a community-based lender like a CDFI. What’s the difference between a CDFI and a traditional lender? Let’s take a look.
CDFIs increase access to small business funding
Because CDFIs have more flexible lending criteria than other lending institutions, they’re able to approve more loans for small businesses. They can also lend to small businesses in every phase of development, from launch to expansion and beyond.
For example, a bank may have certain loan requirements they need to follow before considering a small business loan. This can include a minimum personal credit score of 700+, three or more years of business operations, and other specific financial criteria.
A CDFI will look at these factors, too, but with a wider view. They’ll look at what’s behind your numbers, get to know you and your business, analyze your plan and vision, and understand your goals. Your CDFI will find ways to support your dream by offering financing with terms that make loans easier to budget and repay.
Depending on the CDFI you work with, your loan options may include SBA loans, financing directly through the CDFI, or a mix of both.
CDFIs provide technical assistance to support success
CDFIs are about more than financing: Even after a loan is approved and the money is dispersed, they can offer you a wide range of technical assistance to support your business.
CDFIs are experienced small business lenders and they know that financing is just a first step toward reaching your goals. There are also essential skills and business operations that you need to make your business successful.
CDFIs offer actionable and results-driven education and support – including one-on-one consulting, webinars, online resources, and more. You’ll find sessions and experts that cover financial management for your business, optimizing cash flow, how to handle human-resources challenges, and marketing to reach your target customers.
They also work with local and regional offices of the Small Business Development Centers (SBDCs) and nonprofits such as SCORE to give you additional resources to support of your business’s success.
CDFIs are mission-driven
At the heart of every CDFI is their mission. CDFIs are focused on making fair and responsible loans for under-represented communities throughout the U.S., and they’ve had a huge impact to date. ore than 61% of loans from CDFIs have been given to minority-owned businesses, 47% to women-owned businesses, and 83% to businesses based in low-income areas.
Per the CDFI Fund, to keep their certification CDFIs are required to show that 60% of their financing activity is in eligible Target Markets, which can be specific Investment Areas or a Targeted Population. CDFIs submit annual reports with this information, holding them accountable to their goal of boosting underserved areas and entrepreneurs through affordable financing.
Pursuit is a CDFI serving businesses like yours
Pursuit is a leading alternative lender with a CDFI division serving small businesses across New York, New Jersey, Pennsylvania, and Connecticut. We provide more than 15 loan options including lines of credit for working capital, term loans to purchase, build, or renovate commercial real estate, and much more. 35% of our loans have been made to women- and minority-owned businesses, including many start-ups.
We’ve helped thousands of small business owners get the funding they need to achieve their goals and dreams and we can help you, too.
Contact us today to learn how we can help your business reach higher and grow!
