By Nancy O. Andrews, Ellis Carr, Donald Hinkle-Brown and Joe Neri
As leaders of four of the nation’s largest nonprofit community development financial institutions (CDFIs) with the mission of investing in low-income communities and entrepreneurs, we ask Congress to protect the desperately needed flow of investment capital to America’s struggling cities and towns.
In short, we ask Congress to ensure full funding for the U.S. Treasury Department’s Community Development Financial Institutions Fund (CDFI Fund), whose support enables us and more than 1,000 other CDFIs nationwide to provide patient, innovative capital solutions to help small businesses, expand educational opportunities, and build affordable homes. These investments provide a tremendous bang for the taxpayer buck: On average, CDFIs leverage every federal dollar with at least 12 additional dollars from other sources, including banks, foundations, and impact investors.
CDFI investments in underserved communities promote economic opportunity and inclusive growth.
Last year, $233 million in CDFI Fund appropriations led to more than $2 billion worth of investments and loans across the U.S. Most importantly, this capital has fueled economic growth in thousands of distressed cities and towns, providing economic opportunity for millions of Americans. In 2016 alone, with support from the CDFI Fund, CDFIs nationwide created 36,000 jobs, made 11,000 business loans, and financed 24,000 affordable housing units in urban and rural communities that need it most.
Yet, despite a solid track record of success and consistently strong bipartisan congressional support since its founding in 1994, the CDFI Fund is on the chopping block. The Trump administration’s proposed budget for fiscal year 2018 would eviscerate the CDFI Fund’s vital programs, cutting all but $14 million of its current $248 million budget.
The House voted to restore some of that funding, and although that’s a good first step, we need more than that. The CDFI Fund must continue to operate at full strength. Without the CDFI Fund, small businesses like veteran-owned Honor Capital, which brings affordable grocery stores and jobs to underserved neighborhoods, wouldn’t exist.
Honor Capital’s seven grocery stores in Kansas, South Carolina, Virginia, and Oklahoma have all been financed with CDFI loans. In Wichita and Winfield, Kan., for example, Honor Capital opened two stores that have brought fresh, affordable foods to their communities, created jobs, and attracted new businesses. Each Honor Capital grocery store serves thousands of customers every week.
As part of Honor Capital’s ambitious plan to increase access to healthy foods and support veteran entrepreneurship nationwide, the company will expand to operating a total of 10 stores by the end of 2017, including new stores in North Carolina and Georgia. This growth is made possible by $9 million in innovative financing provided by a partnership of three CDFIs—IFF, Reinvestment Fund, and Enterprise Community Partners. CDFI financing is essential because many start-up and early-stage businesses like Honor Capital have difficulty accessing credit.
In the District of Columbia’s Congress Heights neighborhood, a $14.4 million capital infusion from two CDFIs, the Low Income Investment Fund (LIIF) and Capital Impact Partners (CIP), enabled the Charter School Incubator Initiative to renovate a building that houses two charter schools. Somerset Prep DC and Community College Preparatory Academy serve students in grades six through 12, as well as adult learners. These two schools expand the opportunities for youth and adults to secure high-quality education in their community. Congress Heights, a predominantly African-American and low-income neighborhood, is undergoing pressure from the rapid public and private-sector development in the District. Like other CDFIs, LIIF and CIP are working to ensure inclusive growth by enabling all residents to participate in the revitalization of their community.
The impact of the CDFI Fund’s support goes well beyond dollars and cents.
CDFIs help communities realize their visions of prosperity. They work closely with local nonprofits, businesses, and government to ensure that they are addressing community needs and priorities. They seek out opportunities that traditional financial institutions often overlook: in neighborhoods where median incomes and school test scores fall below national averages, and in businesses like grocery stores that have thin profit margins and higher risk.
CDFI financing is about helping Americans live better lives—through good jobs; safe and affordable housing; access to fresh, healthy foods; high-quality education from early childhood to college; and excellent health care.
America’s cities, towns and rural areas need the CDFI Fund in order to thrive. Congress should ensure that funding for CDFIs is fully restored in the 2018 budget and keep investment capital flowing to vulnerable communities.
Nancy O. Andrews is President and CEO of the Low Income Investment Fund, which is dedicated to creating pathways of opportunity for low income people and communities. Ellis Carr is Capital Impact Partners’ President and Chief Executive Officer and has more than 20 years of experience in the financial services and mortgage industries. Donald Hinkle-Brown is President and CEO of Reinvestment Fund, a national CDFI which integrates data, policy and strategic investments to improve the quality of life in low-income neighborhoods. Joe Neri is President & CEO of Chicago-based IFF, the Midwest’s leading non-depository, diversified Community Development Financial Institution, which focuses on strengthening nonprofits and the communities they serve.
The idea of “community” often conjures images of a geographic place, a shared space where people congregate. While true, communities can be so much more. Their true potential can manifest itself when they foster connections between individuals who share mutually beneficial ideals. Through championing those shared values, community members can create a future of shared prosperity.
This idea of community inspires us here at Capital Impact to look beyond the boundaries of space and place and take action to create ‘communities of opportunity’ built on a foundation of equity and inclusion. In doing so, we can create a network of connections that supports successful outcomes for all.
In an effort to fulfill that vision, we are announcing a new opportunity that allows you to embrace this broader concept of community and support the values that matter to you. Beginning this week, we are offering Capital Impact Investment Notes, the proceeds of which will support investments in underserved communities across the country. I am excited that S&P assigned a long-term issue credit rating of AA to our Notes*, marking the first time an S&P rated Notes offering is being made available by a Community Development Financial Institution on a continuous basis.
For as low as $1,000, you — as an individual or institution — will have the ability to invest in our mission-driven efforts to create jobs, support equitable access to critical services, foster good health and drive economic development — things that our country so desperately needs.
For more than 30 years, Capital Impact has lent to, invested in and developed programs with the residents in underserved communities, communities that traditional lenders are reluctant to support. Central to that effort is our work to partner with and empower communities to identify locally driven solutions that help address their most pressing needs.
I encourage you to read our stories of impact and see that work through the eyes of those individuals in communities who are benefiting from this collective social impact effort. Now you can help us create more stories of positive social change.
This announcementis an important step in providing another way for you to align your investments with your values and truly make a difference in the lives of others.
I hope that you will join us in creating communities of opportunity that break down barriers to success and expand equity for all.
Ellis Carr
DISCLAIMER
This is not an offer to sell or a solicitation of an offer to buy any securities. Such an offer is made only by means of a current Prospectus (including any applicable Pricing Supplement) for each of the respective Notes. Such offers may be directed only to investors in jurisdictions in which the Notes are eligible for sale. Investors in such states should obtain a current Prospectus by visitingwww.capitalimpact.org/invest/capital-impact-investment-notes. Investors are urged to review the current Prospectus before making any investment decision. No state or federal securities regulators have passed on or endorsed the merits of the offering of notes. Any representation to the contrary is unlawful. The notes will not be insured or guaranteed by the FDIC, SIPC or other governmental agency. As of October 16, 2017, the Notes will be offered for sale in all 50 states and the District of Columbia, excluding the States of Arkansas and Washington and the Commonwealth of Pennsylvania.
*S&P Global assigned a long-term issue credit rating of AA to the Notes on September 7, 2017. Please check the current Pricing Supplement at the link above for the S&P credit rating assigned to Notes currently being offered for sale. An S&P credit rating is not a recommendation to buy, sell or hold Notes and may be subject to suspension, reduction or withdrawal at any time by S&P.
More than Money Podcast Interviews Ellis Carr, President & CEO of Capital Impact Partners
Expanding opportunities for residents in low-income communities is the focus of community development financial institutions (CDFIs). These mission-driven institutions prioritize social, economic and racial justice for underserved communities over and above profits, meaning that CDFIs invest in places and projects that traditional lenders are often reluctant to support.
Central to that effort is working to partner with and empower communities to identify locally driven and sustainable solutions that help address their most pressing needs.
What does that look like in practice?
More Than Money, a podcast that explores how “we can use our values to inform how we engage with our work and invest our wealth,” recently sat down with Ellis Carr, president and CEO of Capital Impact Partners, to discuss the organization’s approach to community development and the role of CDFIs in communities.
Listen as Ellis talks with host Dawn Carpenter about our values and how we work as market maker and market catalyst to help communities thrive. We also invite you to read the full transcript below.
More Than Money – Ellis Carr Interview Transcript
Dawn Carpenter (DC): Welcome to More than Money, a podcast that explores how we engage with our work and invest our wealth.
I’m your host, Dawn Carpenter, and for the next 30 minutes, we will explore what our work and wealth mean to us and to others. Our guests share their personal stories of why they work and how they engage as fiduciaries of the material world.
Welcome to the More than Money Podcast. I’m your host, Dawn Carpenter. And for the next 30 minutes, we are going to be on a journey to look at how capital is brought to underserved communities. We are going to be joined in the studio today by the CEO of Capital Impact, a CDFI, yes, more acronyms in this world. CDFI means Community Development Financial Institution. CDFIs are special financial organizations, be they loan funds or regulated banks or financial institutions, who have a special commitment to deploying a large portion of their lending capital into underserved communities. They are designated as such by the U.S. Treasury Department, and some work locally, but today we’re going to hear from Capital Impact, who happens to be located in the Washington D.C. market but is working all throughout the country.
And to complement our conversation about CDFIs with Capital Impact, we are going to hear from one of the users of capital from Capital Impact, Axis Health, a community health provider in the Bay Area of San Francisco, California.
Community Development Financial Institutions, or CDFIs as we call them, share the common goal of expanding economic opportunities in low income and low wealth communities. They do this by providing access to financial products and services for residents and businesses in those disinvested communities. Now CDFIs can be banks, credit unions, loan funds, microloan funds, or even venture capital providers. But what they have in common is that CDFIs are helping families finance sometimes their first homes, by supporting residents who are starting or expanding their businesses, and investing in local health centers, schools, or community centers. The goal of CDFIs is to foster economic opportunity and revitalize neighborhoods.
Now today, we have with us in the studio Ellis Carr. Ellis is the President and CEO of Capital Impact Partners. Capital Impact Partners is a CDFI and is headquartered in Arlington, Virginia, and whose ambitious agenda is anchored by four strategic pillars; addressing systematic poverty, building equitable communities, creating healthy communities, and ensuring inclusive growth.
Ellis Carr, welcome to the More than Money Podcast.
Ellis Carr (EC): Thank you, Dawn. I’m really happy to be here.
DC: Excellent. Well, let’s get started with a bit about your background and the history of Capital Impact Partners.
EC: Sure. So, Capital Impact is a national nonprofit CDFI, and as you mentioned, we’re headquartered in Arlington, Virginia. We have offices, although, in Oakland, California and Detroit, Michigan.
Our mission is to help people and communities break the barriers to success, and we accomplish that by providing financing and technical assistance to help expand access to quality healthcare, education, housing, and food. We got our start a little over 30 years ago, at a time where high-interest rates, inflation, unemployment had a disproportionally adverse effect on low-income communities. And we leveraged the co-op model, the cooperative model, as a means of increasing economic participation, and also a way to build community wealth. We still do those things today.
Since our inception, I’m really happy that we’ve been able to invest over $2 billion in communities across the country, and we currently have about $800 million in assets under management today.
DC: Well, how does your CDFI fit in the financial ecosystem? What are the sources of capital, how do you evaluate risk and return, and probably most importantly, impact?
EC: Great questions. I’ll start with the first one.
So, Capital Impact, and CDFIs like it, primarily serve a group of people that are currently not being served by mainstream financial institutions. And for that reason, we play three distinct roles in communities, the first as a market maker. Capital Impact and CDFIs like us are often market makers because we oftentimes work in the distressed community that has a need that’s not being fulfilled by an existing product or service. And that’s where Capital Impact, and CDFIs like us, that then partner with residents in that community and create tailored resources to address that need.
I think the second role we play in the financial ecosystem is as a market catalyst. Because we can’t and don’t do our work in a vacuum or alone, we develop public-private partnerships that combine capital that invests federal dollars alongside private sector capital from larger institutions. And we’re able to do that because we’re embedded in communities and we have a strong track record, and the ability to de-risk a transaction for a large and, frankly, regulated institution, so that we can bring the much-needed resources into communities that may not otherwise have those resources.
And then, I think the third way that we play, and this has been an evolving role for CDFIs, is what we call the role as a community quarterback. And that really is effectively an organization that brings people together, articulates the vision, aggregates capital, and aligns efforts from multiple parties or stakeholders towards the common goal.
I think a good example of that would be some of the work that we have done across the country, around developing strategies that really help build healthy communities. And you talked a little bit about kind of our four strategic pillars around equitable communities to have access to quality schools, quality and affordable housing, and options for healthcare and healthy food.
In terms of capital, we get our capital from a variety of sources. Primarily, we get our capital from; we both raise both debt and equity, and because we’re nonprofit equity translates into grants from really a few key sources; large financial institutions and banks. Larger financial institutions would be pension funds and banks, foundations, government, from the federal government and state government, and also from individuals, and we do that effectively.
And that gets to your other comment question around looking at risk and return and impact. We are able to combine those sources to provide solutions that work for the community, that embed most of the benefit of the work that we do into communities, while also encouraging private investment into those communities as well.
And so, we evaluate risk and return much like all of our traditional financial services organizations would, but we also look at impact. And impact is kind of our reason for being, and so that really is one of the primary ways that we look at the transaction. We look at it holistically, but we tend and can take more risk because impact is first and foremost.
I think it’s also important to say from our return perspective that we are profitable but we’re not profit maximizing. So, that allows us a good amount of flexibility to be able to really push for impact and ensure that we’re embedding the right benefits and the right controls in place in the community.
DC: Well, that’s a whole lot to accomplish. What type of skills do your bankers have to have to do this work? It sounds like you almost have to be magical storytellers.
EC: So, I would say first and foremost you have to have a passion for the mission and for helping others.
To your point, you have to be extremely communicative, and the ability to interact effectively with a ranging group of people from residents in the community to community leaders, to bankers on Wall Street. You have to be able to communicate effectively with them and so speak the very languages that each one of those constituencies can relate to you.
I think that you have to be able to multitask, right? We are an organization of about 80 folks, and so we have to wear multiple hats. And so, having the ability to multitask is critical.
As well as having great analytical skills. Because we are kind of a hybrid between a traditional financial services organization, and also fighting for social and economic justice in these communities, that’s not a typical role that you can find just anywhere. And so, we have been really focused on developing an associate program here at Capital Impact that really helps people to come in and understand credit, understand the sectors we work in, and how to lend to them.
DC: Well, on that note, how does your private sector background, how has that prepared you for the work that you do at Capital Impact?
EC: Sure. I mean, I have been fortunate to work for a few great companies before I came to Capital Impact and held positions in operations, corporate finance, strategy, and capital markets. And I think I’ve been able to leverage all of those experiences at Capital Impact.
I think for me, one of the most important things that I’ve been able to leverage from my background is, what I’ve just mentioned, the ability to speak and be conversant in multiple different constituencies, specifically, kind of to our Wall Street investors and our large investors. Because it’s important for them to have the confidence to invest in us as a financial intermediary so that we can more effectively do our work on the ground. So, ensuring to them that we have the right procedures and protocols in place, and also have the right skillsets to be able to do the work we have, has been truly important.
And I’d say, also, just working for larger organizations you get a really good understanding of best practices across the continuum of business that we’ve been able to implement effectively here at Capital Impact.
DC: Well, I’ll tell you, measurement is key. So, how do you measure the success of what you’re doing, and what’s some of the work you’re most proud of?
EC: Great question. So, I think we measure our success in two ways. The first, and I mentioned this earlier, is impacting in the community; and the second is financial sustainability.
Again, our reason for being and for doing what we do is to create real and true long-lasting impact in communities. So, we measure and evaluate both the outputs; i.e., the number of school seats that we create and the jobs that create in communities. But we also look at the outcomes; things like the number of students who graduate from high school, and also go on to graduate from college and are able to give back to their communities.
We also kind of look at financial self-sustainability as well, which means that we need to be profitable. While we’re not, again, profit-maximizing we also recognize that for us to continue to invest in communities like we are, we need to ensure that we also reinvest in Capital Impact so that we can double-down and do the things that we do across the country.
DC: Kudos to all of you because you’ve been doing some extraordinary work.
But you know, before I let you go, I would be very remiss by not telling you that we’ve snagged one of your biggest fans for the next segment here on the More than Money Podcast, Axis Community Health from the San Francisco Bay Area.
Now tell us, what about the project with the Axis Community Health Partners best illustrates the work that you’re doing at Capital Impact?
EC: I think I’m really proud of the work that we’ve been able to do with Axis. They provide critical healthcare resources for low-income residents around them.
And what I’m most proud about with that is the number of people that now we are able to help provide access for, healthcare access for, but also Axis is doing things and providing dental resources, and also mental health. All those things are significantly critical in underserved communities and really help for people to thrive, people to be able to go to school and to get a great education, and also for people to go to work.
So, I’m really happy that we were able to work with them and think they have been doing a fantastic job.
DC: Well, kudos, again, to all the work that you and your colleagues are doing.
Now, where can our listeners find you on the web?
EC: So, we are, we have our own YouTube channel, but you can find us at CapitalImpact.org.
DC: Excellent. Well, I urge all of our listeners to go out and learn more about the good work of Capital Impact.
And Ellis, thank you for joining us on More than Money. We hope to have you back soon.
By Danielle Graceffa, Senior Director, Legal Services
Real estate development has always been a risky proposition, fraught with numerous challenges that must always be carefully balanced against the promise of reward.
Throw in the possibility of rehabbing historic properties and that risk-reward scenario is certainly amplified. The city of Detroit, where we have our Midwestern office, is a perfect example.
Founded in the 1700s, the city has witnessed various transformations, with Henry Ford setting the stage for Detroit to become the booming manufacturing center that it is best known as. During that time, the population swelled from around 200,000 residents to well over 1.5 million.
By Emilie Linick, Senior Loan Officer, and Quanic Fullard, Impact Strategy Specialist
Capital Impact Partners has long been driven by a mission to help people build communities of opportunity that break barriers to success. To that end, we continually look to expand our lending and incubate, scale, and advocate for new ideas that advance community development for those most in need.
By Ellis Carr, President and CEO and Scott Sporte, Chief Lending Officer
Note: This Op-Ed originally appeared in the publication Capital Weekly.
According to the U.S. Census Bureau’s report The Supplemental Poverty Measure: 2015, nearly eight million people in California were living in poverty in 2015. The report indicated that the state’s poverty rate was 20.6 percent—well above the national rate of 15.1 percent—and surpassed the rates of every other state in the nation.
2016 was marked by change—both for the U.S. and for Capital Impact. Our country witnessed a transition in leadership and with it words and actions that have divided our country. Part of this division included the voices of many who felt the American Dream had passed them by.
We have had a strong year in our lending work, where many of our newest initiatives gained momentum and had tremendous impact in the communities we serve. As witnessed in our 2016 Annual Report, we delivered $118 million in financing through our core lending work that supported community-based health care, high-performing charter schools, innovative approaches to services for seniors, mixed-income housing and access to fresh, healthy foods.
Capital Impact Partners ended 2016 in an extremely strong financial position with unrestricted net assets increasing by $2.4 million. As illustrated in our 2016 Annual Report, our loan portfolio grew by $26 million or 15%, and total assets grew by $42 million or 15%.
As a mission-driven lender, Capital Impact Partners collaborates with a wide range of public, private and philanthropic organizations that invest in our efforts to transform underserved communities into vibrant places of opportunity. These partners—and the financial support they provide—are indispensable. Quite simply, our work would not be possible without them.
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ding work, where many of our newest initiatives gained momentum and had tremendous impact in the communities we serve. As witnessed in our 
As a mission-driven lender, Capital Impact Partners collaborates with a wide range of public, private and philanthropic organizations that invest in our efforts to transform underserved communities into vibrant places of opportunity. These partners—and the financial support they provide—are indispensable. Quite simply, our work would not be possible without them.
