Banks and community development financial institutions (CDFIs) each play important roles in financing projects that strengthen communities. While most borrowers are familiar with traditional banks, many are less familiar with CDFIs. Banks and CDFIs operate independently, and their relationships take many forms. Sometimes partnerships are directly visible to borrowers, and other times cooperation happens behind the scenes. Either way, it isn’t unusual for financial institutions to collaborate on behalf of borrowers.

CDFIs are certified institutions with specific community development mandates. The financing they offer is structured to align capital with measurable project outcomes for community-serving projects. These loans are structured with defined underwriting standards and repayment terms. As with any lender, repayment capacity and financial viability remain central.  CDFI business loans are typically used to finance commercial real estate or business-related projects that support economic growth and community development.

CDFIs Partner with Banks

Many partnerships occur at the institutional level rather than through a specific borrower transaction. Banks often invest in or lend to CDFIs to increase the amount of capital they have available for community development financing. This strengthens a CDFI’s ability to finance projects in communities with limited access to traditional credit.

In contrast, many projects are financed through a combination of bank and CDFI capital, with each institution supporting different components of the financing. The structure depends on the needs of the project and the institutions involved, with terms agreed on before closing.

CDFIs can take an individualized approach. For example, a multi-family affordable housing development may have income shaped by affordability requirements or subsidies, while a community facility may depend on the operating performance of the organization that occupies it. Other projects may bring together several sources of financing. The property itself can introduce additional considerations, as can property ownership and operation.

Thus, banks and CDFIs serve different but complementary roles. Banks provide financing aligned with standardized underwriting and an established financial record, while CDFIs support projects where the structure, use, or revenue model calls for a more tailored approach. When they work together, the synergistic partnership often results in expanded financing for the project.

Clearinghouse CDFI

Clearinghouse CDFI was established in 1996 to serve low-income and disadvantaged communities in Southern California. Since then, it has expanded its service area to address unmet credit needs throughout the U.S., focusing New Mexico and other states in the southwest, including Indian Country.

It provides commercial real estate–based financing, working directly with borrowers and collaborating with banks and other lending partners when appropriate. Every financing request is evaluated on its individual merits, with the goal of helping finance projects that strengthen communities. 

Projects have included multi-family affordable housing, healthcare facilities, charter schools and educational centers, mobile-home parks, office and retail centers, churches, and commercial real estate used by small businesses. Financing may support acquisition, refinancing, or construction. It can also be used for renovation and rehabilitation, gap financing, or operations expansion. These examples are not comprehensive. Eligibility depends on the individual project and proposed loan use, as well as the requested amount and other factors.

Although CDFIs represent a relatively small part of the financial system, they play an out-sized role in expanding access to capital for communities across the country. 

Learn more about Clearinghouse CDFI. Find out about the Clearinghouse CDFI application process.