Leveraging Multiplies the Impact of Social Investments
CRF has transformed community development financing by pioneering a secondary market for community development loans and leveraging the sale of those loans to create even more capital for disadvantaged communities.
With the support of our social investors, we purchase loans from community development lenders, combine and repackage them as asset-backed securities and New Markets Tax Credit (NMTC) funds. These investment vehicles are sold to institutional investors through private placement. Those sales provide a steady stream of repayments (much like a bond), which creates more capital for communities.
How Leveraging Works—A Hypothetical Example
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Leveraging Can Transform $200,000 in Grants
into $10 million in Community Benefits
$200,000 grant dollars (2%) + $1.8 million in social investments (18%)
attracts $8 million in private capital (80%) |
For this example, assume the debt security has a face value of $10 million. CRF allocates about 2% of the total ($200,000) to protect against possible losses -- that is, if any of the loans we bought stopped repaying. That 2% typically comes from charitable contributors in the form of grants. (more . . )
On Average, Every $1 in Grants Can Become $31 or More in Direct Community Benefits, and $1 in Social Investments Generates $5 or More in Benefits
So in this example, the $1.8 million from social-purpose investors plus the $200,000 in grants has the powerful effect of attracting $8 million—financial clout for social impact that is well beyond the original grants and investments.
A Real-Life Leveraging Example—How $500,000 Became 90 Deals Encompassing $15 Million in Lending (more . . .)