Business owners need to have more than just a good idea and a relentless drive. Realistically speaking, they must also have access to financial assistance because launching a business costs a lot of money.
Unfortunately, individuals in some communities don’t have easy access to bank loans. Even if there is a bank in their area, there is no guarantee that they will be approved for a loan due to their current financial standing. Community development financial institutions, also known as CDFIs, are changing that. Learn more about CDFIs and the work they do by continuing with the rest of this article.
What Is a CDFI?
Per the Office of the Comptroller of the Currency, a community development financial institution is an entity that serves members of low-income communities across the country. They grant the individuals in those communities easy access to a wide array of financial products.
For example, a person with a bad credit score will likely have a tough time securing a loan from a typical bank. Upon examining the applicant’s loan request, the bank may simply decide that they cannot afford to take the risk based on the information available.
CDFIs operate differently.
A CDFI will not focus as much on the credit score to determine if the applicant’s request should be approved. Instead, they will evaluate the application based on other factors. The bar applicants need to clear is lower if they are seeking a loan from a CDFI. If your loan application was rejected at the bank, you may have better luck after approaching a CDFI in your community.
How Do CDFIs Help Their Communities?
CDFIs like the one run by Kevin Cohee can do a lot of good for their respective communities. What specific benefits do they provide? You can find out more about them in the section below.
CDFIs Contribute to the Creation of Stronger Communities
Many underserved communities are stuck in poverty because jobs are lacking in those areas. Once CDFIs provide loans to aspiring entrepreneurs, job opportunities in those areas tend to spike. With more jobs becoming available, those communities start to stabilize. They become more organized and energetic. They can keep up with neighboring communities instead of falling back further.
CDFIs Improve Financial Literacy in the Communities They Serve
Many individuals struggle to lift themselves out of poverty because they lack sufficient financial knowledge. CDFIs aim to resolve that issue. Aside from providing the financial products that people in underserved communities need, CDFIs also teach financial literacy. They give applicants the tools they need to succeed along with the knowledge required to sustain that success.
CDFIs Make Themselves Accessible to Many Underserved Communities
According to the US Chamber of Commerce, CDFIs are present in all 50 states as well as the District of Columbia, Guam, and Puerto Rico. You can probably find a CDFI in your area. If you want to fund your business, take the time to look for a nearby CDFI before exploring other options.
Community development financial institutions do a lot of good for the areas they serve. Don’t hesitate to approach a CDFI if you’re seeking financial assistance because it may be able to provide the exact type of support you need.