September 9, 2011
Our vision for the community development industry
Frank Altman, President & CEO
Community Reinvestment Fund, USA
What's the right size for government?
The federal budget battle has Americans discussing that question from Pennsylvania Avenue to Main Street. For the community development finance industry, a sector long reliant on tax credits, financial assistance grants, and guaranteed lending programs, the current debate is a wake-up call for how we do business.
The need for living wage jobs, affordable housing, and strong communities remains as urgent as ever.
Yet can our traditional financing vehicles, and even our traditional industry model, still answer this demand?
Traditional vehicles in jeopardy
Continued availability of New Markets Tax Credits (NMTC) allocations, CDFI Fund awards, and free-flowing capital markets remains uncertain in these anemic economic times. Even products with government guarantees, such as SBA 7A or SBA 504 loans, sit well out of reach for many lenders, due to strict requirements for balance sheet equity. Other options, like the new CDFI bond program, add liquidity to the market, but ignore smaller lenders unable to borrow in $100 million increments.
These are the critical tools that enable community lenders to support the small businesses that create jobs, and the projects that revitalize our low-income neighborhoods. But a "status quo" approach won't be enough to get the job done.
We as an industry need to expand our financing options to deliver capital quickly and efficiently. We need to strengthen our relationships and develop a new, more collaborative network.
Defining a new, collaborative approach
More than 20 years ago, CRF pioneered a new method of accessing the capital markets to benefit small business owners and underserved neighborhoods. Today, our vision for community development finance means continued innovation--this time, to enable sustainable solutions and new partnerships that facilitate job creation and support disadvantaged communities.
These solutions include:
- A renewed commitment to collaboration. Tough credit markets require new partnerships among CDFIs, CDCs, community banks, and market-rate investors. National networks like CRF can play a matchmaking role to facilitate a value chain where all parties work together to maximize funding options. We must create relationships that empower multiple entities to work together quickly and seamlessly--as primary and secondary lien holders, poolers, packagers, project sources, and other roles.
- Options for smaller community development groups. Financing tools must remain accessible to organizations at all levels--not just those CDFIs who can afford multi-million dollar balance sheets. Preserving the local market knowledge of these groups is critical to identifying deserving projects, and providing business owners with technical assistance and hands-on support through all stages of their business.
- Pursuit of policies that support jobs and low-income communities. We applaud new alternatives such as the CDFI bond program, and actively advocate for proven channels like New Market Tax Credits. As an industry, we must continue to come together and tirelessly articulate the need for accessible, affordable small business financing options.
We're excited about these opportunities and relationships. Watch for more details in the coming months.
Share your views on this critical issue.
Posted by: CRFUSA