What is CDFI Friendly Bloomington?
CDFI Friendly Bloomington is a newly formed 501(c)(3) organization that will implement a new strategy developed for the unique challenges of smaller communities to increase flexible and affordable financing to businesses, housing developers, nonprofits, and others in Bloomington, Indiana, and surrounding Monroe County.
We created CDFI Friendly Bloomington to increase flexible, affordable loans in Bloomington and Monroe County for projects and businesses that banks and other conventional financial institutions cannot finance.
Who created it?
CDFI Friendly Bloomington is the product of a collaboration among Bloomington entities including the Community Foundation of Bloomington and Monroe County, the Bloomington Urban Enterprise Association (BUEA), the City of Bloomington, and local business and civic leaders.
Why does it exist?
The community concluded, through a market assessment in 2017, that some small businesses, housing developers, and nonprofits need financing that is more flexible and affordable than local banks are able to offer.
That process also led to an understanding of Community Development Financial Institutions (CDFIs), which specialize in providing the types of financing that Bloomington needs.
What are CDFI Friendly Bloomington’s goals?
CDFI Friendly Bloomington’s goals are to encourage and assist CDFIs to make new loans for projects and to businesses in Bloomington and Monroe County. The Bloomington planning process identified as much as $50 million in new financing possibilities over 5 years (through 2023). That financing should make the local economy more inclusive, creating opportunities for people on all steps of the economic ladder, and increasing economic growth for the City and County.
What’s a CDFI?
A CDFI is a private financial institution that exists to meet community financing needs outside the margins of conventional finance. They work in all 50 states in urban, rural, and Native communities, providing billions of dollars of new financing each year. CDFIs provide financing with development services—technical assistance and training to help their borrowers succeed.
Can you give an example of a possible CDFI loan in Bloomington or Monroe County?
What the community told us in the planning process is that CDFI financing would help with:
- Affordable & Workforce Housing, including supportive housing
- Small businesses, particularly early-stage companies and service companies for sale
- Community facilities and services
Are CDFIs charities?
Most CDFIs are nonprofit companies, but they are economically sustainable and do not depend heavily upon charitable contributions. Over the past 30 years across the U.S, most CDFIs have grown while reducing their reliance on donations. Instead, they earn money from their lending. In fact, the CDFI business model is to be profitable but not profit maximizing.
Why don’t CDFIs already serve Bloomington & Monroe County?
CDFIs have made a few loans and investments in Bloomington and Monroe County, but we have concluded that they will do much more if we help them identify opportunities and share a small part of the risk of making loans.
What is the risk of lending in Bloomington?
All loans involve risk. CDFIs take on extra risk if they lend in places where they do not work all the time, since they are less familiar with the local economy, businesses, and people. One of the big challenges for CDFIs these days is lending in more places.
Why not just start a CDFI in Bloomington?
The community studied that option. Bloomington and Monroe County need many types of financing and CDFIs tend to specialize in one type of financing or another—small businesses, for instance, or multifamily housing. Our community will benefit from a solution that brings a range of financing options to the community. CDFI Friendly Bloomington can do that.
As important, CDFI Friendly Bloomington will do the on-the-ground work of finding projects and businesses to finance and the outreach to CDFIs to pair opportunities with financing.
Is CDFI Friendly Bloomington a CDFI?
It is similar to a CDFI in that it is community-centered and controlled and that it provides flexible, affordable financing. It is different than CDFIs in two key ways:
– One, its primary purpose is to match local demand (for financing) with CDFIs that work in the region, state, or nationally. That means it succeeds when CDFIs invest in the local community. Unlike CDFIs, its primary goal is not to provide the financing itself.
– Two, when it provides financing it is following a CDFI (or CDFIs) into a deal and lending alongside the CDFI—it will not provide financing without another CDFI taking the lead.
How does it work?
CDFI Friendly Bloomington will help find potential financing opportunities that CDFIs might be interested in. Generally, that means financing opportunities that banks have to pass on or that banks can consider only if a CDFI (or another lender) is taking on a share of the risk.
When a CDFI is interested in making a loan, it works with the borrower on the terms and conditions of the loan— the pricing, the length of the loan, repayment conditions, and other things. If the CDFI needs financing assistance, it will ask CDFI Friendly Bloomington to consider joining the deal.
CDFI Friendly Bloomington will make its own, independent decisions about whether to lend alongside the CDFIs (and possibly others, including local banks). It will try to address the CDFI’s concerns so that loans get made.
How is this different than what the banks do?
Local banks are deeply invested in growing the local economy, supporting small businesses, ensuring good housing for all, and other goals related to CDFI Friendly Bloomington. Banks operate under regulations that emphasize “safety and soundness” that sometimes make it difficult, if not impossible, for the banks to provide financing for the types of mission-driven projects that CDFI Friendly Bloomington has been created to advance. That’s where CDFIs come in. Across the nation, CDFI and bank partnerships total billions of dollars.
Are the local banks partnering with CDFIs and CDFI Friendly Bloomington?
Most local banks have financed CDFIs. With CDFI Friendly Bloomington, four local banks have taken leadership positions by planning to provide $2 million in senior debt. The four banks are: First Financial Bank, Old National Bank, German American Bank, and Woodforest Bank.
- CDFI Friendly Bloomington Identifies Deals for CDFIs
- CDFIs Negotiate Loans to Local Borrowers
- CDFIs Request CDFI Friendly Bloomington Participation
- CDFI Friendly Bloomington Decides Whether to Participate with CDFIs
- Loans are Made
In support of CDFI Friendly Bloomington, Bank of America has also announced it will lend up to $10 million at low cost to CDFIs that participate in the community alongside the new entity. Bank of America intends to offer CDFIs financing at 0% and for up to 10 years to support CDFIs in this initiative and as an incentive for CDFIs to do business in Bloomington.
Is that all the financing for CDFI Friendly Bloomington?
In addition, the BUEA and the Bloomington Redevelopment Commission have each made $1 million capital grant commitments. Those grants will work as “net assets” (or “equity”) to enable CDFI Friendly Bloomington to manage its financing risks and attract lenders such as the banks.
When is CDFI Friendly Bloomington opening its doors?
We are open! CDFI Friendly Bloomington filed its legal incorporation papers and our first project closed on October 1, 2019.
How do I contact CDFI Friendly Bloomington?
View the Contact page. We’re looking forward to hearing from you.