Not all businesses are solely dedicated to making money. It may sound counterintuitive, but many small businesses, nonprofits, and other organizations devote themselves to serving and empowering their communities. Economically and socially disadvantaged communities depend on these local institutions to power their economy.
But not all of these organizations can thrive on their own. Sometimes, they need a little extra financial support. Unfortunately, traditional lenders may not be inclined to lend to struggling businesses. When community-focused organizations can’t get the funding they need, they can turn to Community Development Financial Institutions (CDFI) for help.
CDFIs are private-sector financial institutions that primarily focus on lending and business development efforts in economically disadvantaged communities. Their purpose is to support people and businesses that have historically been locked out of the financial system. CDFIs can receive federal funding through the United States Treasury by completing an application that shows they’re dedicated to supporting growth in communities that require revitalization.
CDFIs rely less on credit scores when providing loans and other products and more on the impact of individuals and organizations on their communities. CDFIs emphasize developing long-term relationships with the communities they support, hoping to build financial literacy, establish savings goals, and raise personal credit.
Congress created community development banking in 1994 to help consumers who aren’t served by the mainstream banking system. CDFIs focus on serving the poor and working-class within both urban and rural communities. Many of these people are underserved or ignored by the traditional banking system, so CDFIs aim to help these people be more financially self-sufficient and contribute to the overall health of their local economies.
CDFIs can often offer low-cost mortgages for first-time home buyers, loans for small businesses, and affordable personal loans designed to help consumers rebuild poor credit. Through these financial services, CDFIs aim to extend credit throughout a community, promote economic expansion, and help stabilize the local economy.
There are hundreds of chartered CDFIs operating in the United States. Below, we’ve provided some of the most popular CDFI banks and credit unions in each state. For a more complete list, visit the CDFI Fund website.
Chadron Federal Credit Union
Campco Federal Credit Union