Community Development Financial Institution

For the past 18 months, the Lake & Peninsula Business Development Center has been working towards the ability to provide non-traditional loan funding to Southwest Alaska communities and residents.  The BDC will become a Community Development Financial Institution (CDFI).  Right now, the BDC’s Board of Directors and staff are in the process of determining which type of CDFI to become.  We are planning to be certified as a Native CDFI by the end of 2007 and to start making loans available in early 2008.

There are five main sectors or types of CDFIs, each having its own set of characteristics:

• Community Development Bank,
• Community Development Credit Union,
• Community Development Loan Fund,
• Community Development Venture Capital Fund, and
• Micro-Enterprise Development Fund.

What are Community Development Financial Institutions?

CDFIs are mission-based financial intermediaries that borrow capital from various sources and lend it in the community—primarily in low-income and low-wealth communities—to support:

• Affordable housing and homeownership,
• Community services,
• Small businesses, micro-enterprises
• Other community development projects and infrastructure projects, and
• Individual community members.

• CDFIs also provide technical assistance to their loan applicants and borrowers.
• CDFIs’ community development mission is based on their understanding that one of the underlying problems faced by low-income people and low-income communities is the lack of access to capital.
• CDFIs support community development efforts that provide long-term benefits for both low -income households and low-income communities.
• CDFI’s are meant to be lasing, dependable resources for the community.

The Role of a Community Development Financial Institution:

CDFIs vary in size, geographic focus, and the particular types of borrowers and projects they serve. Some manage less than $1 million in capital, others more than $100 million. Some draw their capital from individual investors, some from religious institutions, and some from a mix of individual and institutional investors. Some operate within single metropolitan areas, others within much larger geographic regions. (The Lake & Peninsula Business Development Center will provide lending services to Southwest Alaska and Bristol Bay communities). Some CDFIs specialize in housing loans; some lend primarily for economic development projects; some lend primarily to small businesses; some lend for a wide variety of community development projects.

The Lending Role: The primary activity of a CDFI is lending or investing. CDFIs are disciplined, professional lenders. They assess the needs of their particular market and develop financial products to meet those needs. They actively seek loan applications for the types of projects they intend to support and evaluate the credit worthiness and social impact of proposed projects.

CDFIs make loans that are considered too risky or unprofitable by conventional lenders, including:

• Bridge loans to finance property acquisition and development costs;
• Gap loans that provide a missing piece of financing; and
• Business loans for enterprises that have little or no credit history, where the loan amount is smaller than a conventional bank can provide, or where the perceived risk is more than a conventional lender can handle.

The Technical Assistance Role: A CDFI’s technical assistance complements its lending function. The technical assistance a CDFI offers to help its borrowers succeed depends on the needs of the CDFI’s target market:

• CDFIs’ borrowers generally require technical assistance;
• Conventional financial institutions do not usually provide this service;
• CDFIs provide technical assistance both before and after making a loan;
• Housing and facilities lenders may provide assistance in developing project budgets and housing design plans for less mature borrowers;
• For more mature borrowers, they may provide training on how to select a general contractor, or how to identify other funding/loan sources, and,
• Micro and small business CDFIs may provide entrepreneurial training, prior to the loan, and hands-on bookkeeping or marketing assistance after they make the loan.

Contact us:

Location: 647 Airforce Road, Suite 237, King Salmon, Alaska 99613

Mailing Address: PO Box 742, King Salmon, Alaska 99613

Telephone: 907-246-3901

Fax: 907-246-3902

Toll Free Calls: 888-616-3983

Our Staff:

William N. Miller, Manager: wnmillergrantwriter@yahoo.com

Chris Todd, Consultant: fscat8@yahoo.ca

Rebecca Hamon, Consultant: rhamonbiz@yahoo.com