Community Development Financial Institutions (CDFIs) are companies, certified by the US Department of Treasury, that offer access to capital to economically distressed communities. The US Department of Treasury explains, “Through monetary awards and allocation of tax credits, the CDFI Fund helps promote access to capital and local economic growth in urban and rural low-income communities across the nation.” These companies may be banks, credit unions, loan funds, venture capital funds, community development organizations or microenterprise loan funds.
CDFIs Are Awarded Through These Programs:
- Bank Enterprise Award (BEA): This program supports FDIC-insured financial institutions that offer assistance in community development activities. These financial institutions receive this award based on their CDFI related activities, distressed community financing activities, and service activities.
- Capital Magnet Fund (CMF): Qualified CDFIs and non-profit housing organizations can apply for the CMF award if the funds will be used to finance affordable housing, related economic development activities, and community services facilities.
- Community Development Financial Institution Program (CDFI): This program was implemented to invest federal resources into CDFIs through the Financial Assistance (FA) Awards and the Technical Assistance (TA) Awards programs.
- Financial Education and Counseling (FEC) Pilot Program: Grants are awarded to eligible organizations so they can provide financial education and counseling services to prospective homebuyers.
- New Markets Tax Credit Program (NMTC): In 2000, Congress established the New Markets Tax Credit Program to increase investments into businesses and real estate projects in low-income areas. According to the U.S. Department of Treasury, “The NMTC Program attracts investment capital to low-income communities by permitting individual and corporate investors to receive a tax credit against their Federal income tax return in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDEs).”
- Native American CDFI Assistance Program (NACA): This program is designed to increase access to credit, capital, and financial services to Native Communities. This is done by the creation and expansion of CDFIs that serve Native Communities.
How Can a Small Business Take Advantage of CDFI Funds?
According to Donna Gambrell, director of the US Department of Treasury CDFI Fund, “CDFIs play a vital role in job creation. Their investments in low-income communities frequently create permanent jobs for local residents, as well as construction jobs for new developments.”
It is a DREAM come true for me. I started realizing that over the years I started getting so big out of my house that we really needed to go into a storefront. I will be developing about ten jobs to start off with, and who know after that. We may expand into needing more people.”
Rae’s Cup+Cake Bakeshop, Lancaster Promenade Lancaster, CA (NMTC) – Clearinghouse CDFI Impact Report
As a small business owner, you may be qualified to receive funding from a certified CDFI to expand your business and create jobs. The CDFI Coalition provides a list of certified CDFIs by state [pdf] to assist you.
Has your business been assisted by a CDFI? Let us know in the comments!