ImpactAlpha, Dec. 16 – The nonprofit Entrepreneur backed Assets Fund will buy loans originated by a half-dozen members of a collaborative of community development financial institutions, or CDFIs, to enable them to make more loans. The fund will sell the loans to banks to satisfy their Community Reinvestment Act requirements.
Initial funding of $8.75 million in the form of grants and investments comes from the Citi, Gates and Robert Wood Johnson foundations, Microsoft and Woodforest National Bank. The Entrepreneur Backed Asset Fund, or EBA Fund, grew out of work by the Aspen Institute and the Microfinance Impact Collaborative and will be managed by Revolve Asset Management, a firm that spun out of Accion.
“We’re trying to build something that goes beyond the life of this pandemic and create a true secondary market for these loans,” Aspen’s Joyce Klein told ImpactAlpha.
Underserved markets. The participating CDFIs make 75% of their loans to business owners of color, and 61% to low- and moderate-income business owners. The Collaborative’s six members are Albuquerque-based Dreamspring, Justine PETERSEN in St. Louis, LiftFund in San Antonio and three members of the Accion network – Ascendus (formerly Accion East), Opportunity Fund and the branch serving Illinois and Indiana. The fund expects to purchase 1,000 small business loans by February.
Paths to liquidity. To free up capital for CDFIs to redeploy for COVID recovery, similar loan-buying and liquidity facilities have been launched in New York, California and Chicago. The government-backed “recovery vehicles” have been structured as special purpose vehicles to buy and hold the loans.
