Funding Out-of-the-Box

With a decline in bank lending more entrepreneurs are looking for non-traditional ways to raise capital.   Innovation has taken reign offering great resources for alternative funding sources.

Business owners can utilize companies such as Coalition of Community Development Financial Institutions also known as CDFI (www.dcfi.org) or Opportunity Finance Network (www.opportunityfinance.net). These organizations provide alternative funding opportunities. CDFIs are private-sector organizations that attract capital from private and public sources. “One crucial source of support for CDFIs is the federal CDFI Fund, administered by the Department of the Treasury.” (via CDFI) There are six types of CDFIs – Community Development Banks, Community Development Credit Unions, Community Development Venture Capital Fund, Community Development Loan Fund, Microenterprise Development Loan Fund and Community Development Corporations.

Opportunity Finance Network provides loans and investments to CDFIs to support the development of affordable housing, small businesses, community facilities, and financial services in low-income urban and rural communities across the United States.

Each type of CDFI has different requirements for borrowers. The Banks lend to non-profit community organizations, individual entrepreneurs, small businesses and housing developers. The Credit Unions lend to members of the CU and they are usually individuals. The Loan Fund provides assistance to non-profits organizations, social service provider facilities and small business. Venture Capital Fund invests in small to mid-sized businesses in distressed communities that has rapid growth potential. A Microenterprise helps low-income individuals and entrepreneurs. Lastly, Corporations assist entrepreneurs, homeowners, business owners, and a consortium of community residents.

The Opportunity Networks has four main criteria for CDFIs to receive funding

1.     Their main mission must include community development or serve disadvantaged people and communities.

2.     Have a track record of at least two years of community development financing.

3.     Must be an Opportunity Finance Network Member.

4.     Be located in Bank of America’s assessment areas

Opportunity Finance Network also provides information such as policy, membership, a list of resources and a CDFI locator. The CDFI website also has resources for policy and advocacy, fund awards, and they host events such as the CDFI Institute.

Some advantages of utilizing alternative funding include the fact that some of the grants or loan programs offered by these organizations sometimes go unnoticed. There are other similar funding organizations such as CDFI. The disadvantage is your potential company may not fall into a category conducive to qualification of funding. Either way there are alternative funding solutions available and business owners should complete extensive research to find a compatible solution.

Resources:

http://www.cdfi.org/

http://www.opportunityfinance.net/