CDFIs/Small Business

What is a CDFI?

The term “CDFI” is one you may not have heard, but you probably know what one is – and, more importantly what it does. CDFI is a technical industry term, short for Community Development Financial Institution that describes banks, credit unions, loan funds, and nonprofits providing critical financial services to communities where none are – or were – available.

According to a recent industry report, CDFIs have about $5 billion at work in communities, helping to make loans available for small businesses, provide job training and daycare facilities, get families into affordable homes, and teach people how to set up savings and checking accounts. Along with over 66 or our borrower organizations, we too are a certified CDFI.

Together we provide opportunity where there is none. We manage risk that more commercial entities may not be willing to take. In short, we help “the little guy,” and our collective services are more in need than ever.

Real-Life Returns

Investors in our Community Investment Note support groups such as the the Seattle Economic Development Fund (SEDF), a certified CDFI since 1998 that provides economic opportunities to under-served populations in the Pacific Northwest. SEDF was able to help small business owner Rosamaria Rosales. When Rosamaria’s husband died three years ago, she was certain she would have to close her small business. Closing would have been a big loss for Rosales, but also for the community. Housed at Centro de la Raza, Excelsior Travel Service was the Pacific Northwest’s first travel agency serving Spanish-speaking clients. Rosales sought and received financial assistance from SEDF, which allowed her to save the business and keep her staff employed. Now, Excelsior Travel Service celebrates its 17th year in business.

© Photo courtesy of Seattle Economic Development Fund

Saving a Local Business

Natural Capital Investment Fund’s extensive work with Laurel Creek Hardwoods demonstrates the mix of capital and technical assistance the Fund brings to its work with small businesses. When the out-of-state owners of the Richwood sawmill decided to sell off their holdings in Central Appalachia as part of a corporate restructuring program, they could not find a buyer and simply shut down the mill. Bill and Sharon Glasscock had been working at that mill for over 10 years.

As long-time employees, the Glasscocks realized that they had the necessary experience and loyal workforce to make the mill thrive. What they lacked was the capital to make it happen. Working with the Small Business Development Center and the local bank, they were able to raise sufficient capital to purchase the mill. But in order to close the deal, they needed to find a source of working capital for day-to-day operations of their new business.

NCIF provided a solution to the Glasscock’s financial predicament. NCIF provided $50,000 in subordinated debt for permanent working capital, thus allowing them to purchase logs and cover miscellaneous start-up costs. NCIF also raised grant funds to hire an accountant to assist the company in developing an internal cost control system.

Bill Glasscock readily admits that the money was crucial to getting their business on its feet. But he says the help from NCIF went beyond merely putting up the capital. Glasscock says NCIF was instrumental in getting him and his wife to think hard about their business plan.

“The thing NCIF did was that they made us go from A to Z for our short-range planning and our long range planning” recalls Glasscock. “It was a great experience. NCIF made you thoroughly research your plans. It would have been much more difficult without NCIF.”

Laurel Creek Hardwoods purchases a large quantity of logs from local, well-managed forestlands. In addition, the reopening of the mill saved 23 jobs and since then has generated more employment opportunities. The company has also upgraded its equipment to increase production yields, increasing yield by 25%.

© Photo courtesy of Natural Capital Investment Fund

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