GEW Session Recap “CDFIs - The Best-kept Secret for Entrepreneurs”
Introduction
Last month, the KC CDFI Coalition hosted a session at KCSourceLink’s Global Entrepreneurship Week – Kansas City, for the second year in a row. The stage was graced by industry experts in a dynamic panel discussion, shedding light on the often overlooked yet impactful world of Community Development Financial Institutions (CDFIs).
Panelists consisted of: Kesi Milligan, Business Development Officer at AltCap, Pedro Zamora, Executive Director of the Hispanic Economic Development Cooperation’s Impacto Fund, and Victor Espinoza, Loan Closer at DreamSpring. The session unveiled the essential role CDFIs play in supporting entrepreneurs and small businesses in Kansas City.
Why CDFIs?
The session kicked off with a poignant acknowledgment: CDFIs are the best-kept secret for entrepreneurs. The KC CDFI Coalition, driven by a mission to unveil this secret, recognizes that although CDFIs may not be common knowledge, they provide vital support for small businesses and various enterprises.
What Sets CDFIs Apart?
The panelists emphasized that CDFIs are mission-driven entities, typically operating as nonprofit organizations mandated by the U.S. Treasury to strategically focus on low- to moderate-income communities. What sets them apart is their flexibility and guidance-based approach with their loan products.
Unlike traditional lenders, CDFIs have more flexible underwriting requirements. They are less strict about collateral, credit scores, and business experience. Additionally, CDFI capital can be used for diverse needs, including working capital, equipment, and real estate. This allows individuals who don’t fit the traditional “entrepreneurial mold” to turn their hobby into a profitable business.
Pairing Capital with Assistance: The CDFI Advantage:
One key differentiator highlighted in the discussion was the pairing of loan capital with technical assistance. Technical assistance, as defined by the panel, consists of various support services including but not limited to advice on business strategies to assisting with their tax and accounting methods. This is then packaged with their loan to help small business owners build credit and become "bankable.” “We typically provide our borrowers with 30 hours of technical assistance before our loan is even delivered”, said Pedro Zamora.
While CDFIs often charge higher interest rates than banks, their mission is to guide entrepreneurs to a stage where they can secure a loan from a conventional bank. That being said, "If you can get a loan from a bank – do it. And we [DreamSpring] don’t have any early payoff penalties."
In conclusion, the panel discussion underscored the pivotal role that CDFIs play in fostering economic growth and empowerment. The KC CDFI Coalition, inspired by this mission, seeks to amplify awareness and support for these institutions, ensuring that small businesses other firms that lack access to capital have the tools they need to thrive.
Stay tuned for more insights from the KC CDFI Coalition as we continue to unravel the potential within community development financial institutions, turning them from the best-kept secret to a driving force for positive change in Kansas City and beyond.