If you need a loan or line of credit for a small business or startup, you might think of getting one from a conventional bank. But for many, that’s not an option. Banks are often hesitant to invest in early-stage businesses because of the perceived higher risk, lack of consistent revenue or lower credit scores startup founders may have.
In 2023, 43% of startups that employ people reported being fully approved for loan and credit applications. For startups or small businesses operated only by their owners, without any other employees, that dropped to just 29%.
So where can founders and small business owners go for financing? That’s where community development financial institutions, or CDFIs, often come in.
What’s a CDFI?
A variety of institutions, including nonprofits, venture funds, loan funds and credit unions, can be certified as a CDFI by the U.S. Treasury Department. That just means an organization’s mission is community development, and that it also has support and education services alongside actual financing.
The certification makes it possible for an organization to get support from the Treasury Department’s CDFI Fund, which has money authorized by Congress to award for community development. That support can either come as direct grants, loans or through new markets tax credit (NMTC) allocations, which create an incentive for private investment into designated investment areas for CDFIs.
How important are CDFIs to Nebraska?
CDFIs are meant to work with historically underserved and low-income groups. By having accessible capital, they boost local economies across both urban and rural areas. Some CDFIs focus on making business and personal loans, while others might also focus on housing projects.
CDFIs are willing to make investments that conventional banks might perceive as being higher risk, especially at early stages for businesses. As a result, more businesses can be created and, as they pay back any loans and generate revenue, have a higher chance of later getting a loan or line of credit from a conventional bank. CDFIs can also play a role in venture capital for startups, unlocking yet more support for the entrepreneurial ecosystem.
CDFIs often operate as a revolving fund, which means that any money paid back over a loan or venture capital investment is then used to make other investments.
In 2022 alone, CDFIs in Nebraska are estimated to have made $7.5 million worth of loans and investments to nearly 9,300 recipients, ranging across businesses, nonprofits and individuals. Over $200 million of CDFI funding went to housing projects.
The federal CDFI fund has helped those efforts. Since its founding in the mid-1990s, almost $70 million in federal aid has been channeled to Nebraska. Several Nebraska CDFIs have regularly received hundreds of thousands of dollars or more of CDFI fund awards over the past few years.
What are the CDFIs in Nebraska?
There are 11 Nebraska-based CDFIs operating across the state. At least 18 other regional or national CDFIs have branches here, and others say they serve Nebraska.
Click on the locations above to visit their websites. (Map by Jen Spitzer/Silicon Prairie News)
Here are the Nebraska-based CDFIs:
- Chadron Federal Credit Union, Chadron
- Native360 Loan Fund, Inc., Grand Island
- Community Development Resources, Lincoln
- Center for Rural Affairs Community Capital, Lyons
- Nebraska Enterprise Fund, Oakland
- Lending Link, Omaha
- Spark Capital, Omaha
- Habitat for Humanity of Omaha Affordable Mortgage Solutions, Inc., Omaha
- Midwest Housing Development Fund, Inc., Omaha
- Omaha 100, Inc., Omaha
- HoChunk Community Capital Inc., Winnebago
Lev Gringauz is a Report for America corps member who writes about corporate innovation and workforce development for Silicon Prairie News.
