Twenty eight years ago, in 1994, Congress created Community Development Financial Institutions (CDFIs) to provide affordable financing to women, minority, and other entrepreneurs historically underestimated.

Women and minority-owned businesses are typically smaller, and have fewer resources, making them less resilient during economic downturns, like the pandemic. Entrepreneurs still must prove creditworthiness, however, CDFIs have lower requirements for credit scores, revenue, and collateral compared to traditional bank financing and have been proving themselves as not overly risky, but very effective in reaching diverse communities and capitalizing small businesses.

Generating cashflow takes time and debt is not suited for most startups, yet many small businesses would increase their chances of success by practical financing and applicable assistance. As such, part of the structure of CDFIs are providing assistance in other ways as well. Borrowers often receive guidance to help them succeed like business coaching for budget and projection development, understanding financial statements, business planning, and improving or establishing credit. Some CDFIs even help small business owners refinance high-cost loans to reduce costs and help their businesses continue to operate.

If your business is finding it difficult to access small business loans through traditional channels, CDFIs are worth a look.