5 Reasons Why Borrowers Need CDFIs
Why do borrowers need CDFIs?
1: Small Business. CDFIs provide needed financing to help reinvigorate distressed communities. CDFIs work with a local lending institution by providing funds to jump-start area businesses. Once that happens, other businesses begin to migrate toward the newly revitalized areas. Small businesses are responsible for 55 percent of all jobs and 66 percent of all net new jobs since the 1970s, according to the Small Business Administration. It’s a winning situation for small business, communities and property values.
2: Rural Communities. Rural and semi-rural communities often need help that local banks can’t provide on their own. CDFI’s provide “turn around” funds for such areas that when once capitalized, assist rural areas to prosper. A CDFI is sometimes the only affordable lender in close proximity. 31 percent of Credit Builders Alliance lender members serve rural communities. The social impact of a CDFI is beyond measure when a rural, unprosperous area receives funds to help expand a rural area’s taxable base.
3: Credit Invisible. Credit invisible typically means that someone is lacking a credit history. CDFIs rely less on credit and more on the final outcome. 26 million people are “credit invisible” according to the CFPB. This means that they do not have a credit record at one of the large credit agencies. A CDFI looks at the prospect of future success rather than the current credit of an existing business, non-profit or a borrower. For an entity or individual with no credit whatsoever, CDFIs can be the answer.
4: Poor Credit. Just like “invisible credit,” poor credit is a small issue with regards to new projects for a CDFI. Those who need or seek affordable housing can thank DRI Fund for the opportunity to rebuild when a traditional bank would turn down the financing desperately needed. A whopping 40 percent of CBA survey respondents said they were unable to qualify at other lending institutions.
5: Counseling Services. Lastly, many times borrowers get deep in debt and they think there’s no way out of their situation. With counseling services, they’re able to see a step-by-step approach to regaining their credit and home ownership standing. 57 percent of those who responded to a CBA survey said that working with a CDFI helped increase their credit score. DRIfund is one of the most respected CDFIs in the country which provides such needed assistance.
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