Stay up to date, get our newsletter
So we’ve been talking about ways for businesses to get financing, and today I want to talk about a really wonderful option for a segment of the business community. And that is Community Development Financial Institutions or CDFIs. These are mission-based financial institutions whose primary mission is to help communities that are traditionally left out of banking and investment options. These organizations provide more than just money too. Yes, they provide loans but they also provide training, business assistance, and mentorship.
There are different kinds of organizations that provide this. Some banks do. Some credit unions do. There are many non-profit and for-profit loan funds as well as venture capital funds that are certified by the US Treasury to be CDFIs. They have unique loan products and eliminate a lot of the barriers to capital that some business owners might have, such as a need to have a specific personal credit score. Some of these loans don’t have any requirements for a credit score. Many of them are not concerned about your time in business. So you will be able to find funding if you’re a startup or a new business and many of them will waive collateral requirements.
So there are many pros to these; low or competitive interest rates similar to what you will find at a bank even though you may not be bankable, a higher likelihood of approval because of their mission to serve certain communities they are easier to get, and business development help. As I mentioned, some of the cons are, that they’re not for everyone. They really are geared for specific communities and there can be longer funding times because these funds don’t have all the capital that a bank has.
There are a bunch in Connecticut. The Community Economic Development Fund is an organization that I’ve been working with for years providing education for business owners. And there are other ways to find them. If you’re looking for one check out the Treasury Department’s Searchable Award Database (https://bit.ly/46sJyyx) or the Opportunity Finance Network CDFI Locator (https://bit.ly/3F3AiVn). Next week, we are going to finish up this series, this long series about financing because I want to dive into some of the philosophical thoughts around when financing is a good thing, and when is it really just a band-aid covering up some of your problems. So, tune in next week. This is Judi Otton with GrowthCast and I’ll be back with a new Fiscal Fitness Tip of the Week.