The $787 billion stimulus plan will double funding for organizations that lend in low-income neighborhoods, a move designed to spur revitalization in areas left behind even before the recession hit.
Local thrifts, banks and non-profits, between the stimulus and the 2010 Obama budget can expect about about $400 million over two years, “a huge increase from the roughly $50 million the Bush administration proposed in 2008,” according to an April 16 USA Today story.
While the coffers of big banks remained shut tight for most borrowers, demand stayed strong at Community Development Financial Institutions, or CDFIs.
The head of one CDFI told the paper his staff has seen “a surge in calls from traditional clients and established businesses that haven’t been able to get loans as regular banks tighten standards or have less capital to lend against.”
Others echoed that experience, saying they couldn’t keep up with demand.
Champ Hall, a small business owner, used the CDFI Community First Fund to launch his business 10 years ago. After being rejected by traditional banks, Hall has since expanded throughout Pennsylvania.
“I got denied. No bank would help with my project,” Hall told the paper.
Community development is the primary mission of CDFIs and they can function as a loan fund matched with private contributions or as a credit union.
There is some talk of closer regulation as the banks become more influential, but right now, getting cash to disburse to needy communities appears to be the top issue.
“Even after the water is calm, there’s a lot more work for us to do,” Donna Gambrell, director of the Treasury Department’s CDFI Fund, told USA Today. “This program fills a void for at-risk borrowers in the financial mainstream.”
This article was submitted by Kathleen O’Connor, a contributing writer for Biz2Credit. Biz2Credit is a small business marketplace that provides entrepreneurs with the latest industry news and financial advice. Send all questions to firstname.lastname@example.org.