+ What is CDFI Friendly South Bend?

CDFI Friendly South Bend is a newly formed 501.c.3 organization that will increase flexible and affordable financing to businesses, housing developers, nonprofits, residents, and others. CDFI Friendly South Bend will serve as a matchmaker between under-resourced individuals and businesses looking for capital and a variety of lenders.

+ Who created it?

CDFI Friendly South Bend is the product of a collaboration among many different industries, including representatives from the City of South Bend, local financial institutions, community organization partners from a variety of sectors – including both affordable housing and small business development – and CDFIs interested in doing work in our region.

+ Why does it exist?

The community concluded, through an organizing process and market assessment conducted throughout 2019, that under-resourced small businesses, housing developers, nonprofits, residents, and others need financing that is more flexible and affordable than local financial institutions are able to offer. This process also built an understanding of Community Development Financial Institutions (CDFIs), which specialize in providing the types of financing that local stakeholders need.

+ How does it work?

CDFI Friendly South Bend serves as a matchmaker between local individuals and businesses looking for capital and CDFIs working in other places, regionally, or nationally. We help CDFIs from other places lend to businesses and individuals. That financing can help make the local economy stronger and more inclusive, creating opportunities for people on all steps of the economic ladder, and increasing economic growth throughout the region.

+ What could a local deal look like?

We heard from many participants throughout our collaborative planning process that capital is needed for two different tracks of financing. The first track is smaller business loans and affordable mortgages for moderately priced homes. The second track is larger projects such as commercial real estate and nonprofit facilities. We anticipate both tracks of lending being used by the end of 2020.

+ What’s a CDFI?

CDFIs are private financial institutions that exist to fill financing gaps and meet credit needs outside the margins of conventional finance. They focus on serving underserved and under-resourced people and communities. They work in all 50 states in urban, rural, and Native communities, providing billions of dollars of flexible and affordable financing each year.

CDFIs provide financing with development services—technical assistance and training that helps their borrowers succeed. CDFIs are unusual businesses. CDFIs are not profit-maximizing but they are profitable. Even though most CDFIs are nonprofit in legal structure, they earn revenue that limits their reliance on philanthropic grants.

+ What about banks and credit unions?

CDFIs and mainstream financial institutions such as banks and credit unions often work hand-in-hand. Most local financial institutions are invested in growing local economies, supporting small businesses, ensuring quality housing for all, and other community needs.

Other times, however, CDFIs work in markets that mainstream institutions cannot serve. They specialize in seeing opportunities and understanding and managing credit risk in unconventional and nonconforming communities and markets. CDFIs usually work in places and ways that are unfamiliar to mainstream institutions and that require different approaches than the mainstream lenders practice. To do that, CDFIs generally provide flexible financing terms, innovative underwriting, and creative strategies for ensuring repayment.

+ Is CDFI Friendly South Bend a CDFI?

It is similar to a CDFI in that it is community-centered and controlled and that it provides flexible, affordable financing. However, CDFI Friendly South Bend is different from CDFIs in a key way: 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 many CDFIs invest in the local community. Unlike CDFIs, its primary goal is not to provide the financing itself.

+ Do CDFIs give grants?

No. CDFIs lend to their customers on creative, flexible, and affordable terms. CDFIs are much more flexible and patient when outlining terms of repayment, but they are still private financial institutions that offer loans with the expectation of repayment. At times, they work with foundations to provide supplemental grants. But their core business is lending.

+ Why don’t CDFIs already serve our region?

CDFIs have made a few loans and investments locally over the years, 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.