Loans to Lenders

CRF provides liquidity to some community development organizations by making a loan to the lender that is collateralized by loans in the lender’s existing portfolio. This loan to lender capital channel works well when a lender has a large number of assets that can be pledged as collateral against an advance from CRF. It is particularly useful when funds are needed for an ongoing loan program, but cash flows come from sources other than loans.

Typical lender’s situation:

Organization receiving loan has documented cash flow that can be pledged as collateral.
Funds needed for ongoing program.

Key Benefits:

Loans to lenders are based on the lender’s financial strengths, instead of your borrowers’ financial strengths.
Transaction costs are likely to be lower because of blanket nature of security interest and lower servicing costs to CRF.

Restrictions:

Seller typically must hold residual.
Targeted minimum transaction: $500,000.

Costs:

Negotiated, but typically lower than other transactions because of relative simplicity.

Example:

Lender E, a municipality, has a $1 million loan fund that provides significantly below-market rates for home rehabilitation. Lender E prefers not to sell the loans because their value to the marketplace is not as high as if they were close to market rates. Because Lender E is a city, and they have other sources of cash flow besides the rehab loan fund, CRF provides a loan of $750,000 based primarily on the loan fund but also secured by other revenue sources.