Place-Based Investing | August 19, 2020

Can real estate financing + small-business lending = equitable community growth?

David Bank
ImpactAlpha Editor

David Bank

ImpactAlpha, Aug. 19, 2020 –– Arlington, Va.-based Capital Impact Partners, a community-development real estate lender, and CDC Small Business Finance in San Diego are teaming up to boost community financing in Los Angeles, Detroit, and the Washington, D.C. area.

The three-city pilot is backed by $6 million in grants from JPMorgan Chase and the Heron Foundation.

Community development experts agree real estate financing for affordable housing, charter schools and health clinics, is more effective when combined with small-business financing for job-creation and wealth-building.

You need all of those components for a healthy and thriving community,” Capital Impact’s Ellis Carr.

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Distribution channels

Capital Impact Partners, a community development financial institution, or CDFI, has raised more than $160 million through its Capital Impact Notes, which are offered monthly to foundations, insurance and mutual funds and retail investors.

Right away, I have access to more capital to lend, to invest,” added CDC’s Kurt Chilcott, one of the nation’s largest nonprofit Small Business Administration lenders.

The tie-up will allow Capital Impact to make loans under the SBA’s Community Advantage program, which feature an 85% guarantee. “It’s a process of getting impact investors comfortable with risk,” “Small businesses are at the riskier end of the spectrum” 

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Equitable growth

The alliance combines the traditional commitment of CDFIs to lending in low-income communities with an SBA lender’s ability to cost-effectively underwrite small-business loans. CDC disbursed 4,000 loans worth $180 million in the federal government’s Paycheck Protection Program.

“Their alliance reimagines the scope, scale and impact mission-based lenders can have on underserved communities,” JPMorgan Chase’s Ted Archer said in a statement.