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Best	Practices	from	Participating	

States:		Partnering	with	Community	

Development	Financial	Institutions	

(CDFIs)	

February	2015	
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Acknowledgements 

This SSBCI Best Practices document resulted from constructive discussions with SSBCI 

state managers in California, Georgia, Kentucky, Minnesota, Montana and Washington. 

SSBCI	thanks	Jennifer	Vasiloff,	Vasiloff	Public	Policy,	for	researching	and	drafting	the	

document	based	on	input	from	the	state	managers	and	CDFI	practitioners. 

Jeff Stout 

Director 

State Small Business Credit Initiative 

 
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The State Small Business Credit Initiative and 

Community Development Financial Institutions 

The State Small Business Credit Initiative (SSBCI) creates a significant opportunity for 

state economic development agencies and Community Development Financial 

Institutions (CDFIs) to increase the availability of small business credit. SSBCI also 

offers CDFIs the chance to build stronger working relationships with state officials 

involved in small business development.

SSBCI funds state-level credit support programs including capital access programs 

(CAPs), loan guarantee programs, loan participation programs, and collateral support 

programs. Cumulatively, from 2011 to 2013, CDFIs made $229.8 million in loans and 

investments nationwide as part of the SSBCI program. This represents a total of 3,657 

loans in 24 different states or territories. Just under 100 of the 971 federally certified 

CDFIs participate in one or more SSBCI programs. 

Still, the potential for further participation in SSBCI by CDFIs exists. This paper is 

intended to be a resource for state program managers and CDFIs alike. 

How do CDFIs differ from other small business lenders? 

CDFIs are mission-driven lenders doing business in low-wealth and other underserved 

markets. Treasury’s CDFI Fund certifies organizations as CDFIs after a review focused 

on mission and their accountability to their target markets.1

 CDFIs include some banks 

and credit unions but the majority are structured as non-profit loans funds. CDFIs 

structured as loan funds do not take deposits and are not regulated. Without the benefit of 

federal deposit insurance, CDFI loan funds protect investors by maintaining high net 

asset ratios.2 CDFI banks and credit unions are regulated in the same manner and by the 

same regulators as conventional financial institutions. 

Why do states include CDFIs in their SSBCI programs? 

Experienced and successful small business lenders are desirable SSBCI participants. In 

many states, such lenders include CDFIs as well as traditional banks and credit unions. 

State SSBCI programs benefit from the participation of CDFIs due to their ability to: 

 Target underserved communities: Because of their knowledge of this market 

niche, and their lending expertise, CDFIs can be effective partners for states to 

increase access to capital for underserved communities. 

																																																								

1 http://www.cdfifund.gov/what_we_do/programs_id.asp?programID=9 2 Aeris is an information service that provides data, analysis, and advisory services that support investment 

in CDFIs. As of the fiscal year ended 2013, the median net assets ratio (net assets for financing/total assets) 

for CDFI loan funds that were Aeris-rated as of 10/29/2014 was 37.5 percent, with the bottom quartile at 

23.3 percent and the upper quartile at 54.2 percent. (Source: Aeris Explorer, accessed 10/29/2014.) 
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 Serve non-traditional borrowers: CDFIs often reach different market segments 

than traditional financial institutions. For example, many CDFIs are experienced 

lenders to non-profit borrowers such as childcare centers or other community 

facilities. Some CDFIs are adept at working with micro-entrepreneurs to provide 

business loans too small to be feasible for conventional banks. 

 Build on their relationships with banks: Mainstream banks usually have strong 

business relationships with the CDFIs in their market. Partnering with a CDFI is a 

low-risk way for banks to meet their obligations under the Community 

Reinvestment Act (CRA), so loan participations, co-investments, and other 

collaborations are common between a state’s mainstream financial institutions 

and its CDFIs. CDFIs can build on this pre-existing relationship to serve as a 

bridge between state officials and the state’s banking sector. 

 Help states meet their SSBCI leverage targets: CDFI loans often fund a portion 

of a transaction that includes capital from a bank or philanthropic investor. With 

other sources of capital in a transaction, the SSBCI credit support can be a smaller 

part of the overall transaction, which increases the private leverage. 

 Boost participation in state programs: In some markets, where demand for 

small business loans is weak or banking sector interest in a state’s credit support 

programs is modest, CDFI loan funds have been the most active participants. 

Why do CDFIs participate in SSBCI programs? 

Job creation and economic development are central to the mission of CDFIs. Any tool 

that enables a CDFI to expand its small business lending is attractive because it allows 

the CDFI to: 

 Access additional loan capital: Using SSBCI support, CDFIs can expand their 

lending activities and/or loan sizes. A few states structured their programs to 

allow CDFI participants to retain the SSBCI loan capital after the program sunsets 

so that funds will continue to revolve into new loans indefinitely. Since CDFIs’ 

supply of capital is usually less than local loan demand, the interests of CDFIs 

and states in deploying capital to creditworthy borrowers are aligned. 

 Manage portfolio risk: CDFIs can deploy SSBCI funds to fund a loss reserve, 

access loan guarantees, offer subordinate financing, or serve as cash collateral for 

their small business loans. In general, CDFIs have had more limited access to 

such tools so their availability through SSBCI represents a new resource for 

CDFIs.

 Have a seat at the table for economic development planning: Enlisting CDFIs 

to further state economic development objectives can lead to mutually beneficial 

longer-term partnerships and new opportunities. 
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 Expand activities to a statewide market: With increased access to credit 

support for their loans, some CDFIs may be able to expand their geographic 

reach. 

How do CDFIs and States partner? 

The SSBCI program accommodates a variety of models for state-CDFI engagements 

such as: 

 CDFIs as lenders that receive credit support: In most states, CDFIs – including 

CDFI loan funds – may enroll transactions in the state’s lending programs just 

like traditional banks. Across the nation, CDFIs are participating in loan 

guarantee, loan participation, collateral support and capital access programs. 

 CDFIs as contractors administering aspects of state programs: Several states 

contracted with one or more CDFIs to administer a SSBCI-funded program. Other 

states have engaged CDFIs to assist with marketing or other specific activities. 

 CDFIs as borrowers: A third possibility permitted by SSBCI Guidelines is that 

non-depository CDFIs are eligible borrowers under the program. This provision 

allows a financial institution to lend to a CDFI with SSBCI support. 

A few successful case studies illustrating CDFIs as lenders and contractors are described 

below. 

CDFIs as lenders that receive credit support 

Kentucky’s Collateral Support Program (CSP) 

Mountain Association for Community Economic Development (MACED) is a Kentucky 

CDFI seeking to transform the lives of people and places in need in Central Appalachia 

through sustainable development. MACED focuses its resources on two key sectors in 

the region: energy and forestry. 

Kentucky’s CSP program was an excellent fit with MACED’s existing initiative to 

promote “Energy Efficient Enterprises.” Energy deals are difficult to collateralize so 

Kentucky’s Collateral Support Program has allowed MACED to make energy efficiency 

loans to businesses that could not otherwise access financing for this purpose. In one 

deal, MACED made a loan to a grocery store in Perry County to upgrade its lighting and 

refrigeration systems. The profit margin on the grocery business is very thin, so cutting 

back on a store’s use of energy can have a greater impact on profitability than increasing 

sales. Kentucky’s CSP provides a pledged asset (cash collateral account) of up to twenty 

percent of the loan for up to a ten-year period to an enrolled lender such as MACED. 

California’s Capital Access Program (CAP) 
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California state officials directed SSBCI funding to its pre-existing California Capital 

Access Program (CalCAP). Capital Access Programs pool contributions from the state, 

the lender and the borrower into a loss reserve account. Each lender maintains its own 

CAP reserve account. If a loan defaults, the lender’s loss reserve account covers losses 

until the reserve fund is exhausted. 

Opportunity Fund is the largest microfinance organization in California and an 

enthusiastic participant in CalCAP. The median size loan from Opportunity Fund is 

$6,000. Prior to the infusion of SSBCI resources into CalCAP, Opportunity Fund was 

enrolling about 50 loans into CalCAP per year. Now, this CDFI enrolls virtually every 

loan they make into CalCAP and volume has risen to approximately100 loans per month. 

As of the end of 2013, Opportunity Fund enrolled over 2000 loans in the program, the 

largest number for any lender in any CAP nationwide. The combination of very high 

volume and the small size of any individual loan have made the CalCAP program an 

ideal tool. CalCAP enabled Opportunity Fund to expand its lending and open new 

branches in San Jose and Los Angeles. 

 

Accion of San Diego also makes extensive use of the CalCAP program. Like Opportunity 

Fund, Accion of San Diego primarily lends to microentrepreneurs. Accion of San Diego 

sometimes makes slightly larger loans which has led them to participate in California's 

Loan Guarantee Program (CSBLP) in addition to CalCAP. By the end of 2013, Accion of 

San Diego had enrolled 138 loans in CalCAP and 60 loans in CSBLP. 

 

Alabama’s Loan Guaranty Program 

Alabama’s Loan Guaranty Program attracted the attention of United Bank, a CDFI bank 

serving south Alabama and northwest Florida. The Alabama program provides a 50 

percent guarantee on term loans or lines of credit. By the end of 2013, United Bank had 

enrolled 40 loans in Alabama’s program, more than any other lender in the state. 

United Bank uses various government guarantee programs to support small business 

lending in their market. The bank is a Small Business Administration Express Lender and 

also uses programs sponsored by the US Department of Agriculture. While the Alabama 

Loan Guarantee Program guarantees a smaller portion of each loan than other federal 

programs, United Bank finds the state program to be more flexible and Alabama state 

officials can often approve a loan more quickly than their federal counterparts. United 

Bank’s leadership treats the program as “another tool in the tool box” to serve its small 

business customers. 

 

CDFIs as contractors administering aspects of state programs

Georgia, Minnesota, Montana, Pennsylvania and Washington state officials contracted 

with CDFIs to serve as program administrators, originators, servicers and even 

underwriters. 
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The agreements between each of these states and the CDFIs include a provision that the 

CDFI will retain the SSBCI loan capital at the conclusion of the SSBCI program in 2017. 

Retaining the SSBCI capital as unrestricted capital on the balance sheet is extraordinarily 

valuable to a non-depository CDFI as it enables the CDFI to take on additional debt, 

which increases its lending capacity and volume. The unrestricted net assets also create 

the opportunity for SSBCI funds to revolve indefinitely, further stimulating lending, 

providing more capital for businesses, and increasing SSBCI’s impact in low- and 

moderate-income communities. 

Washington’s Craft3 Fund 

Washington contracted with one CDFI, Craft3, to administer a direct loan program. The 

Craft3 Capital Corp Fund received $9.2 million from the state’s overall SSBCI allocation 

of $19.7 million. Craft3 injected $2.2 million of its own capital and loaned the fund an 

additional $10.0 million. With this funding in a subordinate position, Wells Fargo loaned 

$31.5 million to the Craft3 Capital Corp Fund, creating private leverage of 4.75:1 even 

before a loan is made. 

The Craft3 Capital Corp Fund makes loans from $250,000 to $5 million. Most of these 

loans are direct loans to businesses, although Craft3 Capital Corp Fund will also purchase 

participations in bank loans. The average term is between 5 to 7 years, with interest rates 

from 5 to 9 percent and fees charged between 1 and 2 percent. 

Under Washington’s program, Craft3 handles all underwriting responsibilities while 

coordinating closely with the state Department of Commerce on program compliance 

issues. The state and Craft 3 hold bi-monthly calls to share information and coordinate. 

The relationship forged through the SSBCI program has led to other partnerships between 

Craft3 and the State of Washington. In November 2013, the state established a Clean 

Energy Revolving Loan Fund of $11.6 million that Craft3 will administer. The focus of 

this Fund is to finance residential and commercial building energy efficiency work and 

renewable energy technology installations. 

Minnesota’s Emerging Entrepreneurs Fund 

Minnesota’s Emerging Entrepreneurs Fund (EEF) attracted strong participation from the 

state’s CDFI community.3 The program provides financing for small and microbusinesses that are starting up or expanding, placing special emphasis on underserved 

communities. State officials focused on micro-lending due to market demand and the 

strong capacity of microfinance organizations, including CDFIs, in the state. 

																																																								

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 As of 2013 year end, the following CDFIs had all participated in the Emerging Entrepreneurs Fund: 

African Development Center, Initiative Foundation, Latino Economic Development Center, Metropolitan 

Consortium of CDCs, Midwest Minnesota Community Development Corporation, Neighborhood 

Development Corporation, Northeast Entrepreneur Fund, Northland Foundation, St. Paul Coalition for 

Community Development (SPARC), and Women Venture 
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The Emerging Entrepreneurs Fund was modeled on a predecessor state program. Out of a 

total of $15.4 million of SSBCI funding that Minnesota received, the state dedicated $6 

million to the Emerging Entrepreneur Fund. Under the program, the maximum loan size 

is $150,000 and each SSBCI dollar must be matched with private funds on at least a 1:1 

basis. Loans under the EEF are limited to businesses with less than 50 employees. The 

EEF targets minority- and women-owned businesses and those located in economically 

distressed areas. 

The state also used SSBCI funds to fund a Capital Access Program utilized by two CDFIs 

in particular, Metropolitan Consortium of Community Developers and Northland 

Foundation. These CDFI Loan Funds also accessed Minnesota’s Loan Guarantee 

Program on several occasions. By the end of 2013, CDFIs accounted for 71 percent of all 

private financing supported by SSBCI funds in Minnesota. 

Georgia’s Funding For CDFIs Program 

Georgia’s Funding for CDFIs program was allocated $20 million in SSBCI funds out of a 

total of $47.8 million for the state. By December 2013, most of the $20 million had been 

deployed . 

The Funding for CDFIs program did not exist prior to the SSBCI program. During the 

recession, numerous Georgia community banks failed, making the remaining banks 

extremely cautious about expanding their small business lending. In response, Georgia 

CDFIs helped develop the Funding for CDFIs program with state officials. The program 

offers a companion loan to a small business in which a bank provides 50 percent of the 

capital, and the CDFI, with SSBCI funding, provides the other 50 percent. 

Under the program, five4

 participating CDFIs serve as contracting entities. CDFIs market 

the SSBCI program, recruit potential bank participants, identify potential borrowers, and 

underwrite and service loans. When SSBCI loan principal and interest are paid, the 

CDFIs retain the funds to re-lend into new SSBCI projects. 

CDFIs are encouraged to offer lower interest rates on small business loans which are 

typically in the $100,000-$250,000 range. The program aims to provide loans to qualified 

small businesses to create job opportunities in low-to-moderate income, minority, and 

other underserved communities throughout Georgia. 

Montana’s SSBCI Program 

Montana dedicated its SSBCI allocation of $12.8 million to a loan participation program. 

The state’s priority was to achieve geographic coverage, particularly in underserved rural 

markets, and to expedite delivery of the credit support. Montana contracted with 3 

																																																								

4 Access to Capital For Entrepreneurs, Inc. (ACE), Albany Community Together Inc. (ACT!), Small 

Business Assistance Corporation, Southwest Georgia United and Georgia Cities Foundation. 
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CDFIs5 and 6 revolving loan funds6 (RLFs) in implementing the program. State officials 

concluded that these organizations brought the necessary relationships and experience 

with small businesses and lenders. The three CDFIs were responsible for lending over 50 

percent of the state’s allocation. Montana’s has deployed all of its SSBCI allocation.. 

Under Montana’s program, the participating CDFIs and RLFs identify loan participation 

opportunities following credit standards mandated by the Montana Board of Investments. 

Qualified lenders are usually community banks but CDFIs are also eligible lenders. The 

nine CDFIs and RLFs prepare loan applications, and close and service loans. The 

Montana Board of Investments underwrites the loans, which average about $500,000 

with terms of 15-20 years. Interest rates are in the 5-6 percent range. SSBCI funding was 

available on a “first-come, first-served” basis which created an incentive for the nonprofit 

partners to identify and process potential deals quickly. 

A strong working relationship between state officials and Montana CDFIs pre-dated the 

arrival of SSBCI resources. This enabled the state to move quickly to identify participants 

and implement the program. CDFIs and RLFs retain the loan capital after it is repaid, 

allowing it to revolve indefinitely in the state to support small business lending. 

Lessons Learned Thus Far 

CDFI and state officials’ understanding of one another varies from state to state. 

Some states have a long history of working with CDFIs. Beginning in the 1990s, 

Pennsylvania directly supported the growth of the state’s CDFIs through a dedicated 

program.7 In Pennsylvania, it was natural for the state’s SSBCI strategy to include a 

significant role for CDFIs. 

When community banks and other traditional lenders are strong participants in state 

SSBCI programs, the lack of an existing working relationship made little difference to the 

success of the state’s programs. In other states, failing to engage CDFIs represented a lost 

opportunity for both parties as well as for small business borrowers. 

Some CDFIs overlook the importance of reaching out to state officials. While most 

CDFIs work closely with the federal level of government, particularly the CDFI Fund, 

some have devoted minimal attention to relationships at the state level. 

In most states, the CDFI sector is small compared to community banks. 

																																																								

5 Butte Local Development Corporation , Great Falls Development Authority and Montana Community 

Development Corporation

6 Revolving Loan Funds (RLFs) are similar to community development loan funds, the most prevalent 

form of certified CDFIs. These Montana RLFs may have decided not to pursue federal CDFI certification 

because they determined this credential was of limited value or they may not have met one or more of the 

eligibility criteria. For purposes of the Montana SSBCI program, the RLFs effectively functioned as CDFIs. 7

 For more information see http://www.newpa.com/find-and-apply-for-funding/funding-and-programfinder/pennsylvania-community-development-bank-loan-program-pcd-bank 
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As of the September 30, 2014 there were 9178 certified CDFIs nationwide; the number of 

community banks (which includes CDFI banks) was over eight times9

 that number. More 

CDFIs focus on housing finance than on small business lending, reducing the pool of 

potential CDFI participants even further. In some states, there are no or very few CDFI 

small business lenders. See Appendix I for resources to locate CDFIs operating in a 

particular state. 

States’ target business customers for their SSBCI programs which may not match the 

target market of local CDFIs. 

Some states explicitly targeted “underserved” customers based unemployment and 

poverty rates. Other states target much broader categories such as “rural” or “formerly 

banked.” Sometimes this motivated CDFIs to expand their target markets. In other 

instances, there was a mismatch between a CDFI’s choice of customer and a state’s 

broader definition of borrowers deserving of credit support. 

CDFI Loan Funds represent a particular challenge to state officials. 

CDFIs structured as non-profit loan funds are unlike conventional banks in their financial 

structure, risk mitigation measures and customer targets. State officials noted that banks 

and credit unions report standard data; ratings may also be available through regulators. 

While the CDFI loan fund sector is developing a similar capacity through Aeris, the 

majority of CDFIs are not Aeris-rated, and complete information about rated CDFIs is 

only available by subscription. 

The availability of SSBCI resources prompted some states to open up their credit support 

programs to CDFIs for the first time. For example, Minnesota did not allow loan funds to 

enroll loans in its CAP before SSBCI but changed its eligibility criteria to welcome loans 

enrolled by CDFIs when SSBCI funds became available. 

Conclusion

Successful relationships between CDFIs and states in the SSBCI program demonstrate 

the mutual interests in rapidly deploying funds to underserved small businesses. 

Unfortunately, some states and CDFIs have overlooked these opportunities so far. 

Treasury allows all certified CDFIs to participate in states’ SSBCI programs without any 

modification to a state’s original application. States still have time to enroll loans 

originated by CDFIs and to build relationships with these specialized lenders before the 

SSBCI program ends. States and CDFIs should continue to explore how to work together 

in meeting their shared goals of expanding access to credit for underserved communities. 

 

																																																								

8 http://www.cdfifund.gov/what_we_do/programs_id.asp?programID=9 9 https://www.fdic.gov/regulations/resources/cbi/report/CBSI-ExecSumm.pdf		
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Appendix I Resources for more information about CDFIs 

1. List of certified CDFIs from CDFI Fund: 

http://www.cdfifund.gov/what_we_do/programs_id.asp?programID=9 

Download an excel spreadsheet of CDFIs currently certified by the US Treasury 

Department’s CDFI Fund. Sortable by state. Includes contact information 

2. Aeris CDFI locator and fact sheets 

http://www.aerisinsight.com/selector 

Selector tool allows sorting by state and whether the CDFI engages in small business 

lending. Limited to CDFI loan funds reporting data to Aeris. 

3. OFN CDFI locator and fact sheets 

http://ofn.org/cdfi-locator 

Locator tool allows sorting by state and whether the CDFi engages in small business 

lending. Limited to OFN member organizations. 

Appendix II Resources for more information about state SSBCI programs 

1. State programs 

http://www.treasury.gov/resource-center/sb-programs/Pages/state-programs.aspx 

2. Policy guidance 

http://www.treasury.gov/resource-center/sb-programs/Pages/summary-of-where-tofind-program-rules-for-the-ssbci.aspx 

 
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Appendix III: Top 15 CDFIs by Amount Loaned and by 

Number of Loans 

Top 15 Largest SSBCI CDFIs, by Dollar Amount Loaned 

(Cumulative through 2013) 

Rank CDFI Number

of Loans Amount Loaned Average AmountLoaned

1 Access	to	Capital	for	Entrepreneurs	(GA) 15 $28,132,635	 $1,875,509	

2 Opportunity	Fund	(CA) 2470 $23,591,861	 $9,551	

3 Craft3	Capital	Corporation	(WA) 14 $19,399,900	 $1,385,707	

4 Albany	Community	Together,	Inc.	(GA) 10 $15,655,924	 $1,565,592	

5 Small	Business	Assistance	Corporation	(GA) 14 $11,677,933	 $834,138	

6 One	PacificCoast	Bank	(CA,	OR) 14 $9,970,470	 $712,176	

7 Southwest	Georgia	United	Empowerment	Zone,	Inc.	(GA) 2 $8,470,000	 $4,235,000	

8 PriorityOne	Bank	(MS) 11 $8,395,200	 $763,200	

9 Natural	Capital	Investment	Fund	(WV) 10 $8,342,500	 $834,250	

10 Atlanta	Micro	Fund	(GA) 7 $7,410,598	 $1,058,657	

11 The	Progress	Fund	(PA) 16 $6,933,800	 $433,363	

12 Philadelphia	Industrial	Development	Corporation	(PA) 2 $6,870,980	 $3,435,490	

13 Clearinghouse	CDFI	(CA) 3 $6,238,000	 $2,079,333	

14 Renaissance	Economic	Development	Corporation	(NY) 220 $5,527,000	 $25,123	

15 United	Bank	(AL) 41 $5,095,325	 $124,276	

TOTAL 2849 $171,712,126 $60,271

 
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Top 15 Largest SSBCI CDFIs, by Number of Loans 

(Cumulative through 2013) 

Rank CDFI Number

of Loans Amount Loaned Average AmountLoaned

1 Opportunity	Fund	(CA) 2470 $23,591,861	 $9,551	

2 Renaissance	Economic	Development	Corporation	(NY) 220 $5,527,000	 $25,123	

3 Acción	San	Diego	(CA) 200 $3,183,151	 $15,916	

4 TMC	Development	Working	Solutions	(CA) 88 $1,352,632	 $15,371	

5 Fresno	Community	Development	Financial	Institution	(CA) 66 $1,585,555	 $24,024	

6 BOC	Capital	Corporation	(NY) 55 $1,371,124	 $24,930	

7 United	Bank	(AL) 41 $5,095,325	 $124,276	

8 California	Coastal	RDC	(CA) 30 $1,029,000	 $34,300	

9 Northland	Foundation	(MN) 27 $4,222,293	 $156,381	

10 Metropolitan	Consortium	of	Community	Developers	(MN) 25 $1,641,840	 $65,674	

11 Forge	(AR) 23 $256,000	 $11,130	

12 Opening	Doors,	Inc.	(CA) 21 $231,393	 $11,019	

13 Arcata	Economic	Development	Corporation	(CA) 20 $1,290,618	 $64,531	

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Economic	Opportunities	Fund	of	the	Women's	

Opportunities	Resource	Center	(PA) 17 $136,450	 $8,026	

15 The	Progress	Fund	(PA) 16 $6,933,800	 $433,363	

TOTAL 3319 $57,448,043 $17,309