Black and yellow graphic that reads: Community Development Lending Explained: Construction Loans.

Community Development Lending, Explained: Construction Loans

In this series about community development lending, we aim to shed light on the diverse types of loans we offer, in the hope that it will provide the clarity our borrowers need to make an informed decision about applying for a community development loan.

In this third installment, we turn our attention to construction loans, the financial cornerstone that transforms plans into reality and buildings into vibrant community assets.

What is a Construction Loan?

A construction loan is a short-term loan that propels your development project from the drawing board to a physical structure. It provides the necessary funding to cover the costs associated with building, renovating, or expanding community assets. Construction loans may also cover the costs of buying land, drafting plans, taking out permits and paying for labor and materials. Construction loans typically have higher interest rates than other types of loans because lenders are taking on more risk by financing the construction of a new property. 

Turning Blueprints Into Bricks 

At the heart of any community development project lies the construction phase. This is where ideas take shape, and communities begin to witness tangible progress. Construction loans provide the essential capital for hiring contractors, purchasing materials, and overseeing the entire construction process. They also empower developers to maintain high standards of quality by financing skilled labor, sustainable materials, and adherence to safety standards. Moreover, construction loans cover costs at various stages of construction, from groundbreaking to final touches, keeping the project on track and minimizing delays so communities can start benefiting sooner. 

How are Construction Loans Used in Community Development?

Construction loans enable developers to borrow money to purchase materials and pay for labor necessary to build or rehabilitate a real estate project. Unlike traditional loans, construction loans are tailored to the unique financial needs and timelines of development projects, ensuring that funds are available precisely when they’re needed the most. Because construction loans generally are intended to cover the building process, they’re typically issued for a period of 12 to 18 months. Community developers can use construction loans towards projects such as building or rehabilitating spaces into affordable housing. Capital Impact Partners has closed on a loan to finance the construction of a 37-unit apartment building for veterans and their families living with very low incomes and experiencing homelessness. Once completed, the six-story, 28,0000-square-foot apartment building in the Brightwood Park neighborhood of D.C. will play an important role in building the resilience of the local community.  

Construction loans can be used towards the rehabilitation or construction of charter schools as well. Capital Impact Partners has closed on a construction loan to fund the renovation of a 25,000-square-foot former Kaplan College into the Betty M. Condra School for Education (Condra School) in Lubbock, Texas. When complete, the renovations will allow the Condra School to increase its capacity by 88 percent to 375 students, with larger classrooms and more play spaces to benefit students with attention-deficit/hyperactivity disorder (ADHD).

Flexible, Short-term Financing for Long-term Impact

In the case of a construction loan, disbursement happens in phases. This means that the lender pays the developer in installments, called “draws,” instead of transferring a lump sum. This is to ensure that the developer is using the loan funds for the intended purpose. Each installment coincides with an important phase of the project, such as pouring the foundation, framing, and finishing work. 

One benefit of construction loans is that developers would only pay interest on installments that have been drawn, versus paying interest on the entire loan amount. Another benefit is that construction loans offer more flexibility in terms of loan terms, compared to traditional loans. Developers can make loan terms around the needs of their projects.

Check out our mission-driven lending page for more information about our products to find out which might work best for you.

Black and yellow graphic that reads: Community Development Lending Explained: Real Estate Acquisition Loans

Community Development Lending, Explained: Real Estate Acquisition Loans

In this series about community development lending, we aim to shed light on the diverse types of loans we offer, in the hope that it will provide the clarity our borrowers need to make an informed decision about applying for a community development loan. 

In this second installment, we explain what real estate acquisition loans are, and how developers and community leaders can utilize them to bring their community-centered projects to life. 

What is a Real Estate Acquisition Loan?

A real estate acquisition loan is a type of loan that is used to purchase real estate. This type of loan is often used by community developers to acquire existing property or development land that they plan to preserve or redevelop for affordable housing, commercial development, or other community-benefit purposes.

How are Real Estate Acquisition Loans used in Community Development?

Real estate acquisition loans can be used to purchase a variety of properties, including:

  • Vacant land for the development of new affordable housing, commercial space, or other community facilities
  • Existing buildings that will be renovated or converted into community facilities
  • Distressed properties that need to be rehabilitated or redeveloped to revitalize a neighborhood or community

Vacant land for the development of new affordable housing, commercial space, or other community facilities

Capital Impact Partners has closed on a real estate acquisition loan to Medici Road to purchase a vacant plot in Washington D.C.’s Ward 7. Medici Road plans to develop the land into a 17,000-square-feet building with 12 condo units for sale at prices affordable to D.C. residents earning 80 percent of the Area Median Income — a path to intergenerational wealth building, and a way for long-time residents to stay local in a gentrifying neighborhood.

Existing buildings that will be renovated or converted into community facilities

The Betty M. Condra School for Education Innovation in Lubbock, Texas, was acquired with a real estate acquisition loan issued by Capital Impact Partners. The acquisition of this two-story building increases the school’s capacity by 70 percent.

Distressed properties that need to be rehabilitated or redeveloped to revitalize a neighborhood or community

An illustrative example is that of Skyland Apartments in Washington, D.C. ‘s Ward 8, which was acquired by Enterprise Community Development (ECD), a leading nonprofit affordable housing development firm in the Mid-Atlantic region. With an acquisition loan issued by Capital Impact Partners, ECD’s development of Skyland Apartments preserves 224 affordable residential units and eight commercial units. The residential units are occupied by families earning at or below 60 percent of the local Area Median Income.

Access to Capital, Flexibility, & Partnership Building

Real estate acquisition loans can provide a number of benefits for community development projects. They can provide community developers with the financial resources they need to purchase land or properties  that they might not be able to afford otherwise. The flexibility of being able to purchase any property allows community developers to tailor their projects to the specific needs of the communities they serve. 

Real estate acquisition loans can also help community developers to build partnerships with other organizations, such as lenders, investors, and government agencies. These partnerships can provide additional resources and support for community development projects.

Check out our mission-driven lending page for more information about our products to find out which might work best for you.

Black and yellow graphic that reads: Community Development Lending, Explained: Predevelopment Loans

Community Development Lending, Explained: Predevelopment Loans

In this series about community development lending, we aim to shed light on the diverse types of loans we offer at Capital Impact Partners, in the hope that it will provide the clarity our borrowers need to make an informed decision about applying for a community development loan. In this first installment, we delve into the essence of predevelopment loans, exploring what they are and how developers and community leaders can utilize them to bring their community-centered projects to life. 

What is a Predevelopment Loan?

A predevelopment loan serves as a critical lifeline during the earliest stages of a development project.  It specifically targets the upfront costs associated with project planning and preparation, enabling developers to refine their visions and align them with the needs and aspirations of the communities they aim to serve. This loan bridges the gap between concept and execution, ensuring a solid foundation for success.

Exploring Site Selection & Due Diligence

Choosing the right location is paramount in community development projects. Predevelopment loans allow developers to explore potential sites, conduct due diligence, and assess the feasibility of their projects; this phase involves considerable research and assessment. From evaluating zoning regulations and environmental factors to assessing community demographics and market demand, developers can make informed decisions that contribute to the long-term success of their initiatives.

Capital Impact has financed a predevelopment loan to Chestnut Neighborhood Revitalization Corporation (CNRC) to assess the feasibility of constructing The Ivory, a five-story, mixed-used, mixed-income development in the Chestnut neighborhood of Austin, Texas. The Ivory’s construction is expected to preserve the history, legacy, and culture of Chestnut, once a flourishing artistic, cultural, and commercial hub for the African-American community.  

Engaging Stakeholders & Building Partnerships

Predevelopment loans not only provide the financial means for planning but also facilitate collaboration and partnership building. Developers can leverage these loans to engage with stakeholders, including community members, local organizations, and government agencies. Through consultations, workshops, and community meetings, developers can gather valuable input, build consensus, and establish partnerships that enhance the overall project design and increase its positive impact.

An illustrative example is Russell Woods, a 102-unit assisted living senior housing development located in Detroit. Capital Impact has financed a predevelopment loan to Icon Heritage Partners to ensure that collaboration with the City of Detroit was established so that the renovation of the property fit within the city’s Strategic Neighborhood Plan. 

Navigating Regulatory Requirements & Permitting

Complying with regulatory requirements and obtaining necessary permits can be complex and time-consuming. Predevelopment loans enable developers to navigate these processes efficiently by allocating funds for legal and consulting services, permit fees, and other regulatory expenses. This support streamlines the development timeline and minimizes potential obstacles, ensuring smoother project progression.

Mitigating Risks & Demonstrating Viability

Developing a successful community-centered project involves potential risks. Predevelopment loans mitigate these risks by providing financial resources to overcome obstacles encountered during the planning phase. By demonstrating project viability and commitment, developers enhance their credibility when seeking additional financing from lenders or investors for subsequent project stages.

TBV Courtyard, a 12-unit affordable multifamily development in the South Annex neighborhood of Richmond, California, is a great example of how additional project financing comes more easily when project viability is demonstrated. TBV Courtyard represents phase two of a larger development plan to provide a total of 105 units of affordable housing to the neighborhood. Given that phase one’s predevelopment studies proved viable, the process to receive financing for phase two was seamless.

Check out our mission-driven lending page for more information about our products to find out which might work best for you.

Black and yellow graphic that reads: Community Development Lending, Explained

Community Development Lending, Explained

For anyone seeking to access lending for community development projects, understanding the different types of loans can be confusing.

At Capital Impact Partners, our commitment to fostering positive social impact drives us to support mission-aligned real estate developers and community development leaders with a range of flexible and affordable financing solutions.

Our community development lending offerings include predevelopment loans, real estate acquisition loans, construction loans, working capital loans, refinance loans, New Market Tax Credit (NMTC) leverage loans, and NMTC Qualified Low-Income Community Investment (QLICI) loans.

Our loan products are designed to help our borrowers achieve their goals and revitalize communities, whether that constitutes developing or preserving affordable housing, creating jobs through a small business, or building the resilience of communities through access to health care, healthy food, and education.

In this series of blogs, we aim to shed light on the diverse types of loans we offer and explore their significance within the context of Capital Impact’s mission-driven financing, in the hope that it will provide clarity to help borrowers make informed decisions about applying for community development loans.

We walk through the different types of loans we use to support developers and community leaders in bringing their community-centered projects to life:

Black and yellow graphic that reads: Community Development Demystified: A Glossary

Community Development, Demystified: A Glossary

As a mission-driven developer, organization, or business looking into community development projects, you may be coming across language that might sound confusing and be challenging to understand. What is a CDFI? What is NMTC? What is LTV?

At the Momentus Capital branded family of organizations, we leverage the combined expertise of Capital Impact Partners, CDC Small Business Finance, and Momentus Securities to expand capital and opportunities for underestimated communities.

At Capital Impact Partners specifically, we offer flexible and affordable financing to a broad range of community development projects that deliver social impact, including community health centers, public charter schools, small businesses, cooperatives, healthy food retailers, affordable housing developments, and dignified aging facilities.

This glossary aims to demystify terms to help you navigate through our lending and programmatic services and offerings. Below you will find definitions of terms divided into the following thematic sections:

General

Community Development Financial Institutions (CDFIs)

Community Development Financial Institutions (CDFIs) are mission-driven private sector financial institutions that focus on serving people living with low incomes and people who have historically been locked out of the financial system. Their work entails providing lending for small businesses and community projects, affordable housing, and essential community services in the United States.

As a CDFI, Capital Impact Partners has delivered community facility financing, capacity-building programs, and impact investing opportunities to champion key issues of equity and social and economic justice since 1982.

Community Development 

Community development activities tackle underestimated populations that do not have equitable access to affordable housing, health care, healthy food, and education, nor connections to capital, entrepreneurship, and quality jobs, to help them become stronger and more resilient.

At Capital Impact Partners, and together with the Momentus Capital branded family of organizations, we offer a continuum of capital products and services to transform how capital and investments flow into underestimated communities and drive community-led solutions that support economic mobility and wealth creation.

Lending Process

Capital Stack

Debt coverage ratio (DCR) is a measurement of a firm’s available cash flow to pay current debt obligations. While a DCR of 1.25 is the minimum requirement for most lenders, a higher number — such as 2 — shows lenders you are financially stable and can repay your debts. A higher DCR can also mean a potentially lower interest rate as lenders see you as less of a risk for defaulting on your loan.

Loan Term

The term of a loan is the period of time a borrower has to repay the loan. This choice affects their monthly principal and interest payment, their interest rate, and how much interest they will pay over the life of the loan.

Loan-to-Value (LTV)

The loan-to-value (LTV) ratio is a measure comparing the amount of one’s mortgage with the appraised value of the property. The more equity put into a loan transaction, the lower the LTV ratio.

Term Sheet

A term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment. The term sheet serves as a template and basis for more detailed, legally binding documents. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is drawn up.

Underwriting

Underwriting is the process of your lender verifying your income, assets, debt, credit, and property details to issue final approval on your loan application.

Loan Types 

Predevelopment Loan

A predevelopment loan serves as a critical lifeline during the earliest stages of a development project.  It specifically targets the upfront costs associated with project planning and preparation, enabling developers to refine their visions and align them with the needs and aspirations of the communities they aim to serve. This loan bridges the gap between concept and execution, ensuring a solid foundation for success.

Real Estate Acquisition Loan

A real estate acquisition loan is a type of loan that is used to purchase real estate. This type of loan is often used by community developers to acquire existing property or development land that they plan to preserve or redevelop for affordable housing, commercial development, or other community-benefit purposes.

Construction Loan

A construction loan is a short-term loan that propels your development project from the drawing board to a physical structure. It provides the necessary funding to cover the costs associated with building, renovating, or expanding community assets. Construction loans may also cover the costs of buying land, drafting plans, taking out permits and paying for labor and materials. Construction loans typically have higher interest rates than other types of loans because lenders are taking on more risk by financing the construction of a new property.

Business Acquisition Loan

A business acquisition loan is a financial instrument designed to provide funding for individuals or businesses to purchase an existing business. These loans are often sought by entrepreneurs looking to expand their business portfolio, individuals seeking to become business owners, or existing business owners interested in diversifying their operations by acquiring complementary businesses. In the case of community developers, the specific goal would be to further community development initiatives.

Loan Refinancing

A refinance refers to the process of revising and replacing the terms of an existing credit agreement. Borrowers usually choose to refinance a loan seeking to make favorable changes to their interest rate, payment schedules, or other terms outlined in their contract. If approved, the borrower gets a new contract that takes the place of the original agreement.

New Market Tax Credit (NMTC) Qualified Low-Income Community Investment (QLICI) Loan

Community development entities, such as Capital Impact Partners, use New Market Tax Credit (NMTC) allocations to provide subsidized financing for qualifying businesses or real estate projects. Projects must meet the federal definition of a Qualified Active Low-Income Community Business (QALICB) to be eligible for NMTC financing. QALICBs are businesses that are located in, or provide services to communities living with low incomes.

The capital that a community development entity provides to a qualifying project is known as a Qualified Low-Income Community Investment (QLICI) and it is a seven-year, interest-only loan.

Health Care 

Integrated Care

Integrated care is a unique approach to health care that is characterized by close collaboration and communication between multiple doctors and healthcare professionals. In other words, it is a type of healthcare where all of your doctors work together to solve issues with your physical, mental, and behavioral health. At Capital Impact, we support the Integrated Care model because it improves the quality of care, promotes better health and lower costs while creating thousands of jobs, spurring economic development.

PACE (Program of All-inclusive Care for the Elderly)

The Program of All-Inclusive Care for the Elderly (PACE) provides comprehensive medical and social services to certain community-dwelling elderly individuals, most of whom are dually eligible for Medicare and Medicaid benefits.

Affordable Housing

Area Median Income (AMI)

Area Median Income is the income for the median household in a given region. If you were to line up each household from poorest to wealthiest, the household in the very middle would be considered the median.

Tenant Opportunity to Purchase Act (TOPA)

TOPA, or “Tenant Opportunity to Purchase Act”, is a type of anti-displacement housing policy that gives tenants options to have secure housing when the property they rent goes up for sale, while also preserving affordable housing.

Cooperatives

Food Co-ops

A food co-op is a grocery store that is totally independent and owned by the community members who shop there. An illustrative example is ChiFresh Kitchen, a food co-op owned by justice-involved Chicagoans. ChiFresh won a Co-op Innovation Award and was not only able to continue its expansion, but also pivot to provide freshly cooked and culturally appropriate foods to those impacted by COVID-19.

Housing Co-ops

A housing co-op provides an alternative to the traditional methods of acquiring a primary residence. It is a type of residential housing option that is actually a corporation whereby the owners do not own their units outright. Instead, each resident is a shareholder in the corporation based in part on the relative size of the unit that they live in. Capital Impact Partners has helped ROC USA, a nonprofit that helps residents form cooperative corporations to purchase their manufactured home communities from private owners and manage their neighborhoods in perpetuity. They have gone on to become a powerhouse in this area, helping thousands of residents become homeowners and community stewards.

Worker Co-ops

Worker cooperatives are values-driven businesses that are owned and operated by their employees. Capital Impact has made a $1 million preferred equity investment in Obran Cooperative, a unique company that operates a number of worker-owned healthcare companies.

Worker Co-op Conversions

Worker co-op conversions – or employee ownership conversions –  occur when businesses transition from a traditional ownership structure to employee ownership. Essentially, the business owner sells the business to the employees. These conversions (PDF) can drive company productivity while rewarding the people who are contributing to the company’s success, as well as helping to preserve the company’s mission and values.

In 2021, Capital Impact Partners financed the worker co-op conversion of Ward Lumber. This new cooperative is another example of the power of worker co-op conversion to maintain and increase wealth and stability within communities.

Capital Impact Partners 40th Anniversary

Forty Years of Breaking Barriers to Success & Building Communities of Opportunity

2022 is a special year for us at Capital Impact Partners as it marks our 40th anniversary. Four decades of leaning into helping people build communities of opportunity and developing pathways to success.

And while this is an exciting time for us as we embark on a new strategy under Momentus Capital, it is equally important to remember our roots as a champion for the cooperative movement.

Co-ops represent a cultural shift away from blind profit toward shared social benefit. It is a model that challenges the status quo and offers workers, especially workers of color, an alternative to extractive systems. 

These principles not only shaped our work in the very beginning, but continue to anchor our strategy as we grow and evolve and develop new business lines and affiliate organizations. They even underpin our newest vision statement to help create an economic system that respects and uplifts all peoples’ right to achieve the dreams they have for themselves, their communities, and generations to come.

Our Co-op Beginning

While we are now a national organization of nearly 300 staff members across our family of organizations, Capital Impact’s beginnings were quite humble. 

One our our first pamphlets…many names ago.One our our first pamphlets…many names ago.

In 1978, Congress rightly saw the need to better support the cooperative movement. That led to the passage of the National Consumer Cooperative Bank Act and the creation of the National Cooperative Bank. 

Four years later, a tiny division known as the Office of Self-Help Development and Technical Assistance was launched to provide more focused work on bringing co-ops to underestimated communities and contribute to the economic development for people living with low-to-moderate incomes.

Over time, this effort grew and went through several different names before becoming Capital Impact Partners – the nonprofit Community Development Financial Institution we are today. 

To date, Capital Impact has lent nearly $315 million in support of food, worker, and housing cooperatives, and has provided $725,000 in grants for co-op development.

More important than the numbers is the incredible journey of discovery to imbue our work with a co-op lens and shape the impact we can have with communities. It is a journey that has cemented our role as a mission-driven organization dedicated to fostering health, wealth, and justice for underestimated communities.

Expanding to Support Community Development

As our cooperative work expanded across the country, so did our support for community development more broadly. We saw that, for communities to be healthy and thrive, they needed a spectrum of vital social services, from health care to education to affordable housing. 

Farmers workers in California often have very little access to health care, so OLE Health takes health care into the fields.

Some of my favorite stories are about projects we’ve financed over the years that have had great impact on their respective communities. Like OLE Health, a health care provider in Northern California that recognized roadblocks to patient care and created programs to meet patients where they are. And Montessori for All, a free public charter school in Austin, Texas dedicated to “diverse-by-design” education, with a mission of achieving equitable academic outcomes for students across socioeconomic levels.

A medical professional cares for a farmworker in a rural clinic
California farmworkers receive health care at a makeshift clinic created by OLE Health.

It was also a time where we expanded our approach to not just think as a lender, but how we could amplify community development through other organizations. 

That led to Capital Impact joining with several leading nonprofit organizations to help form ROC USA Capital, a nonprofit that helps residents form cooperative corporations to purchase their manufactured home communities from private owners and manage their neighborhoods in perpetuity. The true power of what this means can be seen in Takesa Village, a community that we helped to finance so they could become stewards of their land.

ROC USA has championed the dignity inherent in all forms of housing, particularly manufactured housing, and build the power of manufactured home communities to control their own destinies

Residents of Takesa Village community point to their community sign
ROC USA, a longtime partner of Capital Impact Partners, helps residents of manufactured home communities, like Takesa Village, to purchase their community and operate it cooperatively, which has preserved affordable housing options across the country.

Evolution Toward Holistic, Place-Based Investment

Over the years, not only has our scope of work developed — but so did our footprint. We saw an opportunity to support Detroit communities in a holistic manner that would advance economic prosperity and social justice for longtime residents, an opportunity that led to a concerted place-based strategy.

In the early 2000s, when the Great Recession sent the Motor City reeling, we were asked by the Kresge Foundation to be part of the Living Cities Integration Initiative. This effort was designed to support the city’s revival by joining with other organizations to invest in a “place-based” strategy designed to foster holistic ecosystem change. 

It proved to be a seminal moment for our organization. This strategy allowed us to draw and define on a map the different parts of the city where we knew our work would be most effective. It taught us the importance of what it meant to stand shoulder-to-shoulder with a community, understand the barriers it faced, and work with community members to implement their solutions.

This type of engagement at the local level provided a real understanding of what was going on in the neighborhoods that we serve.

Some great examples of developments we invested in Detroit and Michigan include The Auburn and Casamira — which brought affordable housing options and mixed-use space to local communities — and Imperial Fresh Market, a grocery store that serves its community in northwest Detroit with fresh, healthy food daily. 

Grocery store employee stocks produce
Imperial Fresh Market has supported its Detroit community with access to healthy food and quality jobs since the Shina brothers opened more than 20 years ago.

We found this approach so impactful that we applied this place-based strategy to our approach in other parts of the country, including northern and southern California, Michigan and northwest Ohio, Texas, the New York Tri-State area, and the Washington metropolitan area.

Equity is the Beginning of Wealth & Health

Our work on the ground in Detroit also revealed another opportunity we had overlooked. While we were making good strides in our lending, we were missing entire swaths of the population who simply never had the opportunity to launch the kinds of projects we supported.

Opportunity has been historically driven by access to quality education to build quality jobs that build generational wealth. For residents of underestimated communities, access to the financing, training/education, and networks that would help them open businesses or engage in real estate development to build local wealth and health have been systematically denied. 

That realization led to the creation of our EDI program – a program that provides training, mentorship, and access to capital for developers of color – which has since expanded beyond Detroit to the Washington metropolitan area; the San Francisco Bay Area; and Dallas, TX, and has served more than 200 developers. 

Participants in Capital Impact DMV EDI program
Through our EDI program, developers across the country get a foothold into the real estate development industry, with training, mentorship, and access to capital.

In leading this investment in developers of color, we listened to their needs around access to capital. Listening to the financing gaps they experienced led to us creating the Diversity in Development Loan Fund in Detroit and the Washington metro area, which will soon be expanded nationally. 

Our work in listening to community members to develop products and services to support their needs has not gone unnoticed. Fast Company recently recognized Capital Impact’s work in their 2022 list of the Most Creative People in Business

It was this understanding of the need to listen to communities and ensure that our strategy addressed systemic issues and barriers that led to another seminal program. 

In 2015, we created and have continued to manage our Co-op Innovation Award to amplify innovative co-op business models in communities living with low incomes and/or communities of color. Since that time, we have supported 17 co-ops nationwide and disbursed $685,000 in grants, which helped our awardees leverage more than $9.1 million in additional funding from foundations, investors, and government.  

Worker-owners of Tightshift Laboring Cooperative
Cooperatives are powerful tools for economic stability and wealth building. Our Co-op Innovation Award has given seed funding to innovative co-ops fostering self-determination nationwide.

Cooperatives have so much power to create economic stability and self-determination for residents of underestimated communities, and the power becomes greater when it can be scaled. Another conversation that we have been taking part in is around the potential of employee co-op conversions to foster a deeper level of economic mobility and stability. These conversions happen when a business owner sells the business directly to their employees, rather than into the market. With Baby Boomers retiring, many healthy businesses have no one to inherit the business and no buyers; as a result, these businesses are closing in record numbers, and that trend was only exacerbated by the COVID-19 pandemic.  

In 2018, we published “Co-op Conversions At Scale,” a market research report to assess the growth potential of employee ownership (worker co-op) conversions in several markets, and convened CDFIs, small banks, and credit unions to learn about opportunities for scaling and financing co-op conversions. 

In 2021, we turned that research into action and financed the employee ownership conversion of Ward Lumber, a 130-year-old business in New York, allowing more than 40 employees to become worker-owners.

What we learned is that true transformation comes from deep investments in local ecosystems to change the systemic and historical issues that have kept communities from building generational wealth that would help them thrive. 

New Horizons for Addressing Systemic Disinvestment

Today, we continue the throughline of our work, which centers on building prosperous communities through economic, social, and racial justice. We are challenging ourselves to think bigger and more creatively about how to work hand-in-hand with community members to foster equitable and inclusive opportunities for wealth building. 

In July of 2021, Capital Impact Partners, CDC Small Business Finance, and Ventures Lending Technologies came together to create the Momentus Capital family of organizations. This milestone was achieved through two years of work to come together as a new enterprise. 

Momentus Capital is a first-of-its-kind financial organization that brings together leading companies rooted in social mission. Momentus Capital offers a continuum of financial, knowledge, and social capital to help local leaders build inclusive and equitable communities and create generational wealth. Together, we are now able to leverage our 80+ years of experience to offer our borrowers and partners an even more comprehensive set of solutions – including lending and impact investments, training and access to networks, and innovative technology – while also being more innovative and nimble than we could when operating separately. 

Most recently, we began looking at the opportunity to offer more than just loans and grants, but also actual equity investments in companies run by diverse entrepreneurs and/or serving communities of color. Much like in other areas we focus on, Black communities are drastically underserved by the venture capital community. We decided this was another place we could make a difference by offering. To address this issue, we launched our impact investments program, which combines venture debt, revenue/profit-sharing agreements, and preferred equity investments to aid growth-stage businesses led by diverse entrepreneurs and employee-owners.

While we invest in a broad range of companies, it is critical that cooperatives be represented.

One of our very first investments was in Obran Health, a unique company that operates worker-owned healthcare companies. When Obran Health sought to acquire Physicians Choice Home Health, a home health care provider in Los Angeles, we provided a $1 million preferred equity investment. This allowed Obran to avoid the traditional route of syndicated loans and debt which would have hampered their long-term growth.

Innovating Systems for Thriving Communities 

The opportunity for community impact is immense. Healthy communities are built by their residents. Small business owners, developers, and other local leaders are the engines of job creation and economic activity in communities across the country. When these leaders have the opportunity to succeed, their communities, local residents, and our country – thrive.

And while we are looking forward to catalyzing profound community transformation through Momentus Capital, we recognize that we are here because of the 40 years of expertise we have built with our colleagues and partners. We will always remember our roots in the cooperative movement and will continue investments to expand that community. From loans and grants to seminal research and equity investments, our work through Momentus Capital opens up a whole new area where we can uplift co-ops and support their work.

I am so proud of where Capital Impact Partners has come in the course of the last 40 years, and I cannot wait to see how Momentus Capital will innovate holistic approaches to get resources into the hands of more local leaders, entrepreneurs, and their communities. 

As we continue to celebrate this milestone year, watch our 40th anniversary video series. The series includes rich reflections from the very people who have helped make us who we are, like Terry Simonette, my predecessor and Capital Impact’s longest-serving CEO; Paul Bradley, president of ROC USA; alumni of our Equitable Development Initiative; and so many more.

Watch our 40th anniversary video series!

I invite you to subscribe to our YouTube channel to hear these stories and experiences first-hand. We’ll continue to reflect on, recognize, and celebrate our 40 years in the months to come. I look forward to our continued work together to foster communities of opportunity because we are stronger together, and together, we are creating new pathways to build inclusive and equitable communities by providing people access to the capital and opportunities they deserve.

While the essence of our mission has remained the same over the years, it’s the people – staff past and present, our partners, the communities we’ve had the privilege of working in, and the countless other stakeholders — who are responsible for our journey and our evolution. It’s you who I find the most inspirational. You are the ones who have helped Capital Impact Partners become who we are today — a national Community Development Finance Institution (CDFI) committed to building a nation of communities built on a foundation of equity, inclusiveness, and cooperation.

I’m proud to celebrate and share this milestone with all of you.

Students walk down hallway with teacher

In the Face of COVID-19, One Detroit School Meets its Community With the Services It Needs

Since COVID-19 began, times have been incredibly trying for many across the country. Schools and teachers have been particularly hard-hit, having to figure out what education looks like in this new reality. It has been grueling, the hours have been long, and all of this has taken place as teachers and school staff fear for the health and safety of their students, loved ones, and themselves.

When COVID-19 hit, Detroit Achievement Academy (DAA), a Capital Impact Partners borrower, sprung into action for its community. DAA is a public charter school in Detroit, serving the children of its community with a high-quality education. Many of the students experience poverty, which has only been exacerbated during the pandemic. DAA is already known for going above and beyond for its students, teachers, and staff, considering everyone who walks through the doors as part of the school family. As a result, DAA is one of the top performing elementary schools in the city. 

As you will see in this video story by the Today Show, some of DAA’s students and teachers have struggled during the pandemic. Through it all, DAA has done whatever it can to keep their school family physically and mentally healthy, helping to maintain their strong academic performance. In addition to paying rent and utilities for those who needed support, the school also offered an additional $500 to school staff so that they could prioritize their mental health. 

Capital Impact is proud to support and partner with organizations like Detroit Achievement Academy that put mission, family, and community first. Organizations like DAA truly understand that in extraordinary times, we have to offer more in order to give everyone what they need. 

Watch Janelle and Kyle Smitley, DAA’s founder, as they talk about Detroit Achievement Academy and how their school is prioritizing the needs of its community and staff.