Comparing Capital Channels
Because the ultimate purpose of each method is to provide lenders with capital, we call them “Capital Channels.” Each takes a different route to provide cash, and each has its advantages. Compare to see which approach may be right for you.
| Advanced Commitment |
CRF and the lender agree in advance on the terms of loans to be purchased. Then CRF buys some or all of each loan as it is originated. Can be done on a programmatic basis or for a single loan. |
- Lender can time sales to meet cash demands.
- Lender transfers risk to CRF on those loans meeting no-recourse criteria.
- More flexible than many governmental programs’ funding, such as Small Business Administration’s loans.
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| Existing Loan Purchase |
CRF buys existing, seasoned loans from the lender. The lender gets cash, generally without recourse. |
- Lender can leverage current capital with CRF’s funds.
- Additional leveraging is possible with some state or federal matching programs.
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| Structured Finance |
CRF advances cash against lender's loan portfolio. The amount advanced depends on the portfolio's market value. Then the portfolio is securitized, but the lender retains residual interest. |
- Proceeds may be increased because lender retains residual interest.
- Efficiency of scale reduces overall transaction costs.
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| Lending Partner Loans |
CRF provides a loan to the community development lender using the lender’s loan portfolio and cash flow to determine amount of loan and repayment schedule. |
- Loan is based on lender’s financial strength, not the borrower’s.
- Efficiency of scale results in lower transaction costs.
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