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Federal Resources for CD Banks and CDFIs
CDFI Certification - In order to access funding for many CDFI Fund programs, a CDFI must be certified by the CDFI Fund. To be certified a CDFI must be a legal entity; have a primary mission of promoting community development; be a financing entity; provide development services; principally serve one or more eligible target markets; be accountable to the target markets served; and not be either a government entity or be controlled by a government entity. CDFI Fund Programs requiring certification include: Financial Assistance (FA), Technical Assistance (TA), Bank Enterprise Award Program (BEA), Native American CDFI Assistance Programs (NACA), and New Markets Tax Credit Program (NMTC). The CDFI maintains a list of certified CDFIs on its Web site.
Bank Enterprise Awards Program - Through the Bank Enterprise Award (BEA) Program, the CDFI Fund supports financial institutions around the country that are dedicated to financing and supporting community and economic development activities. The BEA Program complements the community development activities of insured depository institutions (i.e., banks and thrifts) by providing financial incentives to expand investments in CDFIs and to increase lending, investment, and service activities within economically distressed communities. Providing monetary awards for increasing community development activities leverages the Funds dollars and puts more capital to work in distressed communities throughout the nation.
Community Development Financial Institutions Program - Through the Community Development Financial Institutions (CDFI) Program, the Fund uses federal resources to invest in and build the capacity of CDFIs to serve low-income people and communities lacking adequate access to affordable financial products and services. The Fund provides monetary awards for financial assistance (FA) and technical assistance (TA) through the CDFI Program.
New Markets Tax Credit - The New Markets Tax Credit (NMTC) Program was created to spur growth in distressed communities by catalyzing private sector investments that create jobs and enhance access to capital for small businesses and community development. The CDFI Fund allocates tax credit authority to Community Development Entities (CDEs) that provide tax credits to investors. The proceeds of these investors’ investments are used by CDEs to finance business and real estate developments in low-income communities. A CDE is any duly organized entity treated as a domestic corporation or partnership for federal income tax purposes that: (a) has a primary mission of serving, or providing investment capital for, Low Income Communities or Low-Income Persons; (b) maintains accountability to residents of the low-income community through their representation on any governing board of the entity or any advisory board to the entity; and (c) has been certified as a CDE by the CDFI Fund. Certified CDFIs and SBA designated SSBICs are automatically qualified as CDEs.
Native American Initiatives Program - The Native American Initiatives Program was created to increase the access to credit, capital and financial services in Native Communities through the creation and expansion of CDFIs primarily serving Native Communities. The Program has two principal components. Expanding Native Opportunities (ENO) is a training initiative focused on increasing the number of Native CDFIs, strengthening the operation capacity of existing Native CDFIs, and guiding Native CDFIs in the creation of important financial education and asset building programs for their communities. Through the Native American CDFI Assistance Program (NACA), the CDFI Fund provides funding to build the community development capacity of Certified Native CDFIs, Emerging Native CDFIs, and Sponsoring Entities, and to increase access to capital in Native Communities. Funding is offered for technical assistance (TA) and financial assistance (FA).
CDFI Bond Guarantee Program - This program provides federal guarantees to bonds issued by CDFIs that make investments for eligible community or economic development purposes. The program is designed to provide a source of long-term (up to 30 years), patient capital to CDFIs to support their lending and investment activity. Up to 10 bonds, in increments of at least $100 million, not to exceed $1 billion, may be issued annually. The program, available to Certified CDFIs, is expected to be first offered in 2013. The Interim Rule for the program has been published and is available for public content. Please also see the CDFI Bond Alliance for program updates.
Capacity Building Initiative - Industry-wide training will target key issues currently affecting CDFIs and the communities they serve, including affordable housing and business lending, portfolio management, risk assessment, foreclosure prevention, training in CDFI business processes, and assistance with liquidity and capitalization challenges. The Initiative will also offer direct on-site technical assistance and individualized capacity-building plans and will focus on extending CDFI coverage to underserved communities, especially in rural areas. Recent initiatives include training and technical assistance for microfinance, small business lending, small and emerging CDFIs, and understanding market opportunities for supermarkets in underserved communities. Resource Banks and trainings can be accessed through the CDFI Fund’s website.
The Small Business Lending Fund (SBLF) was designed to stimulate small business lending by providing up to $30 billion in capital nationally to qualified community banks (less than $10 billion in assets) and other eligible financial institutions. The U.S. Department of the Treasury provided banks with capital by purchasing senior preferred stock or equivalents in approved institutions. The price a bank pays for SBLF funding will be reduced as the bank’s small business lending increases over an initial benchmark. Nonprofit Community Development Loan Funds were eligible to apply for a $300 million carve out of funds through the program. The program is no longer accepting applications. A map of participating lenders can be found here. A list of the CDFIs that received awards can be found here.
The State Small Business Credit Initiative is a $1.5 billion initiative that is expected to help spur up to $15 billion in lending to small businesses. Under the State Small Business Credit Initiative, participating states will use the federal funds for programs that leverage private lending to help finance small businesses and manufacturers that are creditworthy, but are not getting the loans they need to expand and create jobs. The State Small Business Credit Initiative will allow states to build on successful models for state small business programs, including collateral support programs, Capital Access Programs (CAPs), loan participation and loan guarantee programs, and venture capital programs. Existing and new state programs are eligible for support. Please see the SSBCI Resource Directory for more information.
Community Advantage: Designed to expand the points of access small business owners have for SBA’s 7 (a) loan program, Community Advantage is available to “mission-focused” financial institutions, including CDFIs, Certified Development Companies, and non-profit microlending intermediaries. Community Advantage lenders will be expected to maintain at least 60 percent of their SBA loan portfolio in underserved markets. CDFIs looking to apply to the program should contact their SBA district office. The Participant Guide outlines the application process. This pilot program is to operate through March 15, 2017 and it may be extended or made permanent at the SBA’s discretion.
Intermediary Lending Pilot Program is a three year pilot program to provide direct loans to eligible non-profit intermediaries for the purpose of making small business loans of up to $200,000. SBA is seeking experienced intermediaries to assist small business concerns in areas suffering from a lack of credit due to poor economic conditions or changes in the financial market. SBA’s Intermediary Lending Pilot (ILP) Program aims to help business owners start and grow successful enterprises. The program is open to private nonprofit organizations such as CDFIs, Community Development Corporations, SBA Certified Development Companies, or agencies established by Native American governments with at least one year of lending experience. Up to 20 applicants will be selected annually. Applications have been received for FY2011 and FY2012 awards. FY2013 awards are subject to appropriation by Congress.