When someone is under financial pressure, a 48-hour cash guarantee can sound like the answer. As I talk to people in our community, I keep finding that there’s limited awareness of secondary lending options, and some people are finding themselves buried in a hole, trying to recover after taking on a high-interest loan.

Our region in Southwest Central Indiana is full of innovative people – from entrepreneurs who bring new business concepts to life to housing developers who get creative by building or reusing structures to serve those struggling to afford housing. However, to bring these projects to fruition, a financing piece is often required, and it isn’t always straightforward.

CDFI Friendly Bloomington (CFB) exists to help borrowers access safe alternative lending options. CFB is a 501(c)3 nonprofit community development organization that connects small businesses, child care providers, affordable housing developers, and nonprofits to mission-based lenders called CDFIs, or community development financial institutions, that specialize in flexible, accessible loans for underserved or distressed communities. We provide free technical assistance and guidance, helping borrowers navigate their options and get in front of the right lenders. 

Despite the need, our region has historically seen little investment from CDFIs compared to other parts of the country. To put it in perspective, from 2005-2022, the per-resident loan investment from CDFIs across the U.S. was $714. In Indiana, that number was $169 per Hoosier, and just $22 for residents of our 13 counties. This means that our region of the state lacks access to a sector of financing that exists for others across the country. Since our organization’s inception in 2019, that number has increased from $22 to $57 – and we hope to continue that trend. Doing this means more of our Hoosier neighbors have access to financing (capital) for their project that they might not have had otherwise – and that’s important for our households, our neighborhoods and our economy. But it takes networking, partnerships and awareness for what options are out there to get it done.

Many borrowers start at their local bank, which we encourage. They develop their idea, prepare all of the necessary documentation, and apply for financing, but a bank isn’t always able to approve a loan. For many borrowers, that denial can feel like the end of the road – so what then? A borrower may remember the ad they saw on their phone last week, promising a 48-hour cash guarantee. In moments of financial pressure, it can seem like the easiest option. However, predatory lenders often target borrowers with steep interest rates and inflexible terms that can quickly drain a borrower’s cash flow and create long-term financial strain. Through increased awareness, and referral partnerships with banks and others in the housing and small business community – finding the right financing fit can get much easier.

I learn more each week about how CDFIs can uniquely help those in need of financing. CDFIs are a helpful resource for people who may have a lower credit score, don’t have much collateral, or need start-up capital for their new business – or for an affordable housing project.

Our goal isn’t just to connect people to loans. It’s helping to ensure that promising ideas in our region aren’t stopped simply because someone was turned down from traditional financing and didn’t know where to turn. Access to capital doesn’t just help the borrower; it strengthens entire communities.

John Zody is Executive Director of CDFI Friendly Bloomington, Inc. Reach out at john@cdfifriendlybtown.org.