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A Community Development Finance Institution (CDFI) is a specialized financial institution that provides capital and technical assistance to under-served communities in order to promote economic development and expand access to financial services. Community Development Financial Institutions are typically 501(c)(3) nonprofits that are certified by the U.S. Treasury Department's Community Development Financial Institutions Fund.
CDFIs fill a critical gap in the market by investing in businesses, real estate, and infrastructure projects that are often under-served by traditional financial institutions. By doing so, CDFIs help to create jobs, spur economic development, and increase access to essential services in low- and moderate-income communities.
In the United States and specific US Territories, CDFIs invest in businesses and local community projects that promote economic development and create jobs in low-income communities. They also provide financial education and technical assistance to help entrepreneurs start and grow their businesses. These funds are commonly used in real estate projects, neighborhood renovation, community centers, training programs, and opportunities that boost interest in business ownership within emerging communities.
CDFIs play an important role in developing economies by providing capital to businesses and projects that would otherwise not have access to financing. Such a financing entity could work with a local credit union and utilize venture capital and other programs such as the Community Reinvestment Act. This helps to create jobs and improve the quality of life in under-served communities. CDFIs also help to develop the local economy by providing technical assistance and training to entrepreneurs who aspire to become small business owners. This helps them to start and grow their businesses, which creates jobs and boosts the local economy.
The EPA Community Change Grant Program offers grants ranging from $10M to $20M for projects aimed at reducing pollution and enhancing climate resilience in EPA-designated Disadvantaged Areas. Established under the Inflation Reduction Act of 2022, this initiative promotes environmental justice and sustainable community development in underserved regions.
To qualify, applicants must form a Statutory Partnership between two entities: a nonprofit community-based organization and either another nonprofit, a local government agency, or an institution of higher education. Additional Collaborating Entities will support the implementation of priority projects through subgrants.
Eligible partners should demonstrate a proven track record in managing federal grants, a strong history of community engagement, and the capacity to handle complex projects. The application deadline is November 21, 2024, with all projects to be completed within three years.
The New Markets Tax Credit (NMTC) program is operated through intermediaries known as Community Development Entities (CDEs). CDEs are private companies that have to meet two requirements to be certified as a CDE: the first is that the entity must have a stated mission of serving low income communities, and the CDE must be accountable to the low income community it serves by appointing representatives from the community on either a governing or advisory board so that they have a role in project prioritization and selection. CDE's compete annually for an allocation of authority under the NMTC program, once an award is made the CDE then identifies specific projects to invest in.
CDE's are looking for projects that:
In order to attract a CDE it’s important for project sponsors to have assembled as much data as possible about the positive economic, social and environmental impacts of the project.
Community Development Finance Institutions (CDFIs) are specialized financial institutions that provide financing and technical assistance to underserved communities in order to promote economic development. A Community Development Finance Institution utilizes the CDFI fund in combination with other funding from community development banks, community development credit unions, venture capital loan funds, and other state or local programs.
CDFIs play a critical role as an investment adviser in developing economies by providing access to capital for small businesses, entrepreneurs, and low-income households. In addition, CDFIs help to create jobs and spur economic activity in communities that lack access to traditional banking and lending services. By investing in under-served communities, CDFIs help to create more equitable and sustainable economies.
"Capacity building," or increasing an organization's ability to operate effectively, is critical to the success of community-based lenders and the people who depend on them. The CDFI Fund's Capacity Building Initiative offers a variety of training and direct technical assistance opportunities to Community Development Finance Institutions looking to strengthen their organizations and, ultimately, serve distressed communities in new and innovative ways.
The Clean Communities Investment Accelerator (CCIA) Program is a significant funding initiative aimed at bolstering environmentally friendly projects in low-income and disadvantaged communities. With a total of $6 billion allocated for capitalization and technical assistance, the program supports mission-driven lenders by providing them with the necessary resources to finance critical environmental initiatives. Five selected applicants are establishing hubs to distribute subgrants to community lenders of up to $10M for capitalization and $1M in technical assistance, focusing on projects such as distributed energy, net-zero emissions buildings, and zero-emissions transportation. The overarching goal of the CCIA is to empower community lenders to drive environmental projects that contribute to the revitalization and sustainability of their communities, ensuring that capital is dedicated to enhancing infrastructure in areas most in need.
The CDFI Fund website provides a search engine for CDEs that provide financing in your area. You can research these CDEs to determine whether any have mission statements that might cover your project. In the event you find this search and the attempt to make connections overwhelming, you can use CBO Financial’s Free Project Analysis service to get expert advice on innovative financing avenues for your project.
