Chicago Community Ventures Blog

Community Lenders Get Stimulus Boost

A great article today in USA Today about how CDFIs are using the dollars received from the stimulus plan to continue to serve the communities that need it most. 

An excerpt:

"A little-known provision of the massive $787 billion stimulus law recently passed by Congress doubles federal funding for so-called Community Development Financial Institutions (CDFIs) such as Community First Fund. That includes local thrifts, banks and non-profits that serve low-income neighborhoods often ignored by large institutions or exploited by high-cost predatory lenders. President Obama's 2010 budget includes more money for the financiers, to help distressed areas hit hardest by the recession.

Overall, the stimulus law and budget plan allocate about $400 million over two years to community lenders, a huge increase from the roughly $50 million the Bush administration proposed in 2008.

That may seem like chump change compared with the trillions the Treasury Department and Federal Reserve have poured into large financial firms. But every dollar of CDFI funding should leverage $14 to $20 in economic activity, providing vital activity in low-income areas that were reeling even before the downturn."

Read the full article here.

Stimulus Bill - What It Means for Small Business

With the American Recovery and Reinvestment Act now in effect since February 17th many Americans are anxiously awaiting to see how the bill will impact their lives.

As we posted a few weeks ago, we here at CCV were particularly interested to see what provisions were in the bill to help CDFIs and small businesses.  The final legislation includes $100 million for CDFIs which is an enormous win for our sector.  This legislation secures important funding for CDFIs and allows us to continue making an impact in the communities that need it most.

Further, the stimulus bill provides $730 million to the Small Business Administration (SBA) to begin unlocking credit markets and begin economic recovery for the nation's small business sector.  The funding includes:

• $375 million for temporary fee reductions or eliminations on SBA loans and increased SBA guaranteed shares, up to 90 percent for certain loans
• $255 million for a new loan program to help small businesses meet existing debt payments
• $30 million for expanding SBA's Microloan program, enough to finance up to $50 million in new lending

Read more about the details of the funding provided to the SBA here.

President Obama has made a pledge to provide total transparency for the progress of the stimulus bill as well as to keep his administration accountable.  The launch of Recovery.gov is intended to be the central resource for individuals to track this progress. 

Here at CCV we are just as eager as you to get started on the road towards economic recovery and continue to offer our services to those small business owners who play such a critical role in that recovery.  CCV Co-President, Susan Alnaqib provided her perspective on the new bill, "Given that small businesses are the engine for job creation, I think that funding for small businesses in the stimulus plan is vital if we are to get America working again.  I'm thrilled to see this legislation pass." 

We look forward to helping move the economy forward in our role as a CDFI.

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What do you think about the American Recovery and Reinvestment Act and its role in helping small business - we welcome you to weigh in through our comments section below!

What is a CDFI?

A distinction that is sometimes missed when talking about CCV is that we are a certified Community Development Financial Institution (or CDFI) in addition to operating as a non-profit organization. So again, what is a CDFI?

A CDFI is an entity that provides needed financial services to communities and individuals who lack access to dollars necessary for job creation and business development. CDFIs focus specifically on economically disadvantaged markets and underserved communities. CCV’s focus is on women-owned businesses, minority-owned businesses and businesses located in low to moderate income communities. By directly investing in these communities, CDFIs are able to trigger economic activity and community development.

Newsweek recently wrote an excellent article discussing the tremendous power CDFIs possess. While the article is focused on the sub-prime lending crisis, it speaks to the need for CDFIs on a larger scale. The article goes on to applaud CDFIs as being able to “manage risk properly” and citing that “they haven’t bankrupted their customers or their shareholders. Nor have they rushed to Washington begging for bailouts.”

CDFIs are part of a large and growing industry. There are currently 800 – 1000 CDFIs and other opportunity finance institutions open in the United States. The Opportunity Finance Network estimates that as of the end of fiscal year 2005 CDFIs had accomplished:

• Total financing of $4.3 billion
• Financed 55,242 housing units
• Financed 9,074 businesses
• Created or retained 39,151 jobs
• Financed 613 community organizations

Here in Chicago there are other CDFIs aside from Chicago Community Ventures that each have a different focus. Here is a list of some of our partner institutions who are also CDFIs:

• ACCION
• Shorebank
• Chicago Community Loan Fund
• IFF

One way to think about CDFIs is that we act as the bridge between lenders and individuals who lack access to what traditional banks offer.  It is certain that as our country continues on the road towards economic recovery, CDFIs will play an instrumental role.

If you are interested in learning more about CDFIs check out the U.S. Treasury’s CDFI Fund, the CDFI Coalition as well as the Opportunity Finance Network.

U.S. Senate Approves American Recovery and Reinvestment Plan

On January 27^th, the U.S. Senate Committee on Appropriations released the highlights of the approved American Recovery and Reinvestment Plan.  The plan focuses on five areas:

• Infrastructure and Science
• Education and Training
• Energy
• Protecting the Vulnerable
• Health

What is of particular interest to us, as a CDFI, is the $250 million set aside for CDFI Fund programs.  The money is to be used “to immediately provide capital to qualified community development financial institutions to invest in the development of underserved communities.”

Other highlights in the plan that could be potentially big wins for small business:

• $730 million to stimulate lending to small business
• $400 million for rural business initiatives including development of renewable energy

We here at CCV are particularly interested in seeing this bill pass since funding for the CDFI Fund potentially translates into funding for our organization.  Since 2003, CCV has received funding from the CDFI Fund on multiple occasions. These funds have allowed us to expand our reach in

Chicago’s under-served communities, provide technical assistance to small business owners and increase our capabilities to assist in bringing resources to our clients. 

This important legislation is in the process of moving through Congress.  We will keep you posted as we continue to learn more about the passage of this bill.  For more information on the entire American Recovery and Reinvestment Plan read the committee’s press release here.