Their increasing ability to service new businesses and nonprofit organizations makes them valuable additions to local development financial institutions. Making loans at several percentage points below standard market rates makes a broader range of community-based projects possible. Lenders retain claim on their assets but earn less than they could through other forms of investment. The difference in earnings amounts to a charitable contribution to the loan fund's borrowers. From the vantage point of poorer communities, CDLFs can help stabilize or revitalize a community.
Social surplus remains in the private sector, but it can fuel community development in target areas.
In addition to lending money, they provide technical assistance and management training. State legislatures can be called upon to provide loan reserves, thus leveraging public funds for the sake of economic development. For-profit corporations engage in philanthropic activity as well. Local officials can encourage local corporations to support community development projects. Contributions lower the firm's tax bill, while social surplus flows to local public uses.