Community, Community, and More Community…
Community banks, credit unions, and community development financial institutions (CDFIs) all have in common close ties to their communities. These lenders use their knowledge of the local business landscape, and individuals in the business community, to aid in making financial commitments alongside more standard, objective criteria. Even though they are smaller in size, they tend to do more small business lending than their national banking counterparts, but like major banks, all make traditional loans based upon the repayment of principal plus interest.
Community banks operate similarly to large national banks but, as their name implies, they are focused on a particular place. They typically make a wide variety of business loans available, including commercial real estate, business lines of credit, term loans, and SBA loans, and strive to make the terms competitive and issuance expedient. Unfortunately, between 2007 and 2013, the number of small community banks nationally shrank 41%.
Credit unions are similar to community banks, but they are structured as mission-driven co-operatives, typically focused on education, service and/or financial products for underserved populations. Like individuals, businesses may become members; and rather than disbursing profits in the form of patronage refunds, as with many co-ops, credit unions reward their members with some combination of lower interest rates and lower fees.
Community development financial institutions are mission-driven financial institutions, dedicated to delivering resources and financial support to help undeserved communities. There are nearly 1,000 CDFIs in the United States and 26 in Washington State. CDFIs typically receive funding from the CDFI Fund, a program of the US Department of Treasury, and an assortment of private investors, including banks and foundations. CDFIs vary in their target constituency but all are dedicated to making competitive loans, many through revolving loan funds, in the communities in which they operate.
These tools might be for you if…
- Your business is minority owned
- You operate in and/or provide services to an underserved population
- CDFI Coalition
- CDFI Fund
- Business Impact NW (formerly Community Capital Development)
- North Central Washington Business Loan Fund
- Ventures formerly Washington Community Alliance for Self-Help (CASH)