Can CDFI Funds Provide a Reasonable Business Structure in this Economy?

By Joel Block

My colleague Bruce Dobb of www.concernedcapital.org is a recognized expert in community redevelopment financing. As a result of a recent discussion that we had on business structure and related finance, he recapped the following information for our readers:

The U.S. Treasury Department recently set aside $ 3.5 billion in tax credits to be awarded in connection with investment in inner city, urban communities. (see http://www.cdfifund.gov). The Treasury awarded the credits under the last 2008 round of the New Markets Tax Credit (NMTC) Program. The NMTC Program attracts private-sector capital investment into the nation's urban and rural low-income areas to help stimulate economic growth and create jobs.

New Markets Tax Credits generate about $7 dollars of private investment dollars for every dollar of tax credit made available. Banks such as Wells Fargo, Bank of America and U.S. Bank are active participants in such financing. Once the tax credits are pre-sold to investors, funding generally takes the form of sub-debt for real estate investment - giving it the same look and feel as equity in most cases. As always, it comes down to business structure http://tinyurl.com/83sdvt.

Over a billion dollars of these credits went to organizations that service Southern California in this last round. The Treasury awards these credits to specially designed Community Development Financial Institutions (CDFIs). Agencies all over the U.S. are provided with funds. For example, the following CDFIs received money for the State of California:

CA 17 Banc of America CDE, LLC ($85 million)
Boston Community Capital Inc. ($85 million)
Citibank NMTC Corporation ($31.25 million)
Clearinghouse CDFI, The ($90 million)
Local Initiatives Support Corporation ($80 million)
Low Income Investment Fund ($50 million)
MBS Urban Initiatives CDE, LLC ($50 million)
National Community Investment Fund ($30 million)
National New Markets Fund, LLC ($50 million)
National New Markets Tax Credit Fund, Inc. ($110 million)
New Markets Community Capital, LLC ($40 million)
Nonprofit Finance Fund ($50 million)
Northern California Community Loan Fund ($21 million)
UA LLC ($27 million)
usbcde, llc ($80 million)
Wells Fargo Community Development Enterprises, Inc. ($90 million)
WNC National Community Development Advisors, LLC ($35 million)
Total: $1.004 billion

End of comments by Bruce Dobb.

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Thoughts provided by Joel G. Block:

How can CDFI funds help provide you with a new business structure in this economy? I see several applications and there are a number of takeaways from this material - we just have to read between the lines:

1. For readers who are in real estate, there are still lenders who are making loans. Investors may just have to look in different places for the money

2. Larger real estate projects are still being done - and if they do not have sufficient equity find alternative sources of capital.

3. You may have to align yourself with different experts and advisors in this new economy.

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About Joel G. Block

Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenue and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker and advisor. To bring Joel into your company, please visit www.joelblock.com or www.growth-logic.com.

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