Black and yellow graphic that reads: Community Development Lending Explained: NMTC QLICI Loans

Community Development Lending, Explained: New Market Tax Credit (NMTC) Qualified Low-Income Community Investment (QLICI) 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 sixth installment, we explain what New Market Tax Credit (NMTC) Qualified Low Income Community Investment (QLICI) loans and how they are pivotal in supporting projects that uplift communities living with low income by providing crucial financing under favorable terms.

Understanding the New Market Tax Credit Program

The New Markets Tax Credit (NMTC) program is a federal initiative designed to stimulate investment and economic growth in urban and rural communities living with low incomes, communities that often lack adequate access to capital. The primary goal of the NMTC program is to encourage economic development and job creation in communities that are economically distressed. This is achieved by providing tax incentives to investors.

Under this program, Community Development Entities (CDEs) like Capital Impact Partners provide subsidized financing for qualifying businesses or real estate projects that meet the federal definition of a Qualified Active Low-Income Community Business (QALICB). 

A QALICB is typically a business that is located in, or provides services to, communities living with low incomes. The capital provided to these qualifying projects is known as a Qualified Low-Income Community Investment (QLICI), which is typically structured as a seven-year, interest-only loan.

Understanding QLICI Loans

A QLICI is a specific type of investment that is central to the New Markets Tax Credit program. It involves directing financial capital into projects or businesses in communities living with low incomes that meet the qualifications set under the NMTC program.

A QLICI is essentially the financial vehicle through which capital flows from CDEs to QALICBs at favorable rates and terms that traditional financing might not offer.

Why is QLICI Valuable to Developers?

Access to Favorable Financing

QLICIs often come with more favorable terms than those available through conventional financial products. This can include lower interest rates, longer amortization periods, and interest-only payment periods. Such terms can significantly reduce the cost of capital for developers, making projects more financially viable.

Filling Funding Gaps

Many projects in areas experiencing low incomes struggle to secure funding because they are perceived as higher risk. QLICIs can provide the essential capital needed to fill these funding gaps and make such projects feasible. This is particularly important for large-scale developments that can have transformative impacts on their communities.

The importance of this type of loan can be seen through two QLICI notes totaling $7.7 million that Capital Impact provided for Coastal Bank Food Bank in Corpus Christi, Texas. This funding was essential for constructing a new 108,200-square-foot warehouse and distribution center. The project addressed urgent facility needs sparked by explosive growth at the food bank and was critical in a community prone to hurricanes, requiring more expensive construction to meet specific safety standards. New Markets Tax Credits played an indispensable role in the capital stack, preventing potential reductions in food distributions that would have created significant community hardship.

Enabling Comprehensive Development Projects

Developers using QLICIs can undertake comprehensive projects that might include various community-serving elements such as affordable housing, health care facilities, educational institutions, and commercial spaces that create jobs. The flexible nature of QLICIs allows for multi-faceted development that addresses various community needs.

Leveraging Additional Financing

A QLICI can act as a critical piece in the capital stack that attracts other sources of funding. For example, the presence of a QLICI can help reassure other investors and lenders about the viability of a project, leading to increased overall investment.

Community Impact and Compliance Benefits

Projects funded through QLICIs are required to provide measurable community impacts. This aligns with the growing emphasis among developers and investors on social responsibility and impact investing. Additionally, engaging in projects that benefit communities living with low incomes can facilitate compliance with various regulatory requirements or corporate social responsibility goals.

For example, Capital Impact Partners closed on QLICI loans totaling $10.6 million to assist the Center for Transforming Lives in Fort Worth, Texas. The funding supported the conversion of a 102,000-square-foot warehouse into an early childhood education and economic mobility center, increasing childcare availability by 57 percent and boosting economic mobility services to 1,200 women by 65 percent annually. This initiative, crucially supported by NMTC, enabled the construction of a facility dedicated to breaking intergenerational poverty through programming that addresses physical, financial, and emotional needs.

QLICIs are a powerful tool in community development, providing critical financial incentives and benefits that support significant and impactful development projects in disinvested areas. For developers, the strategic use of QLICIs not only enhances the feasibility and scope of their projects but also contributes to their broader economic and social objectives, making them valuable partners in community revitalization efforts.

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


Loan Refinancing


Co-op Innovation Award Awardee Cincy Power in Numbers Cooperative

Co-op Innovation Award: Celebrating 10 Years of Cooperative Movement Building

Imagine a business that doesn’t extract value, but reinvests in its community; where employees aren’t just workers but owners, and where workers have a clear path to wealth building. 

That’s the power of a cooperative, a model in which individuals work together to run a business, buy property, or provide a service. For decades, cooperatives have provided an option for groups and communities – esp. historically disinvested communities – to build wealth and self-determination. 

Like any other businesses, cooperatives (co-ops) need investment to create that growth. Several years ago, we thought: what model could we create to help co-ops in disinvested communities grow and scale? That is how the Co-op Innovation Award was born. This year, we celebrate the 10th anniversary of the Co-op Innovation Award, which we still leverage to celebrate and expand this transformational business model and the access to economic opportunity that it affords. 

Black woman carrying baby at a day care center
Democracy at Work Institute (2015/2016 awardee) helps small businesses transition into worker-owned businesses.

Continuing a Deep History of Supporting Cooperatives

Capital Impact Partners, part of the Momentus Capital branded family of organizations, has provided co-ops with loans and strategic support since our founding in 1982. We were formed through legislation approved by the United States Congress to support the development of cooperatives in underserved communities. In 1978, Congress 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 (NCB). 

Four years later, a tiny division of NCB 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 of 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, we have provided more than $300 million in lending to cooperatives nationwide, fueling the kind of equitable ownership opportunities that allow communities to build wealth.

Car wash working wiping car with a blue mop
CLEAN Carwash (2019 awardee) leveraged its grant to transition from a campaign to end car wash worker exploitation in Los Angeles into a worker-owned co-op and worker center.

Supporting Promising Co-op Models through New Approach

However, in 2015, we realized that some of the most promising co-op projects – many of which are launched by women and diverse communities – needed a different approach from the norm. 

“We saw that the real innovation was happening in smaller, scrappier co-ops,” said Alison Powers, director, Economic Opportunities at Capital Impact Partners. “We wanted to water the seeds they were planting, but folks don’t need to take on debt at the earliest stages.”

To support that goal, Capital Impact Partners launched the Co-op Innovation Award, an annual grant program that supports cooperatives operating in communities that experience systemic disinvestment. Each year, award winners receive a one-year grant (anywhere from $10,000-50,000) to support innovative, early-stage projects with potential for scale. While co-ops from all sectors may apply, preference goes to worker co-ops (product or service providers) and co-ops focused on affordable housing and food access in disinvested areas. 

Award recipients use their funding to launch and market new programs, hire specialists, invest in training and professional development, and more. In addition to this core support, the award often acts as catalytic capital that attracts further investment in these co-ops. Investment dollars can be hard to come by without cash already in-hand; the Award provides that leverage for co-ops. From 2015-2024, the 30 award winners leveraged their combined $1.025 million in grants to secure more than $13 million in additional funding. 

Two food workers filling out trays in a commercial kitchen
Starting out during the COVID pandemic, ChiFresh Kitchen (2020 awardee) has scaled from renting commercial kitchen space to now owning their own commercial kitchen in Chicago.

How Co-ops Transform Communities

At the heart of the cooperative model is the principle of employee/member ownership. Each employee/member contributes equity capital to start or purchase the business and has an equal say in the co-op’s governance, regardless of their financial investment. Profits are distributed among members or reinvested in the business, ensuring that wealth stays within the community and benefits those who contribute to its success.

There are currently more than 30,000 cooperative businesses in the United States supporting two million jobs and earning more than $600 billion in revenue annually, but the potential exists for even greater impact. 

Shared ownership means that the cooperative model can offer employees/members a powerful opportunity to build financial equity, which can help disinvested communities bridge the wealth gap. Local control and ownership keeps each cooperative focused on what its community wants and needs, and successful cooperatives create high-quality jobs and opportunities for employees/members to develop valuable leadership skills. 

We encourage you to explore the resources and support offered by Momentus Capital and to consider applying for next year’s Co-op Innovation Award. Together, we can build a stronger cooperative movement and a more inclusive economy.

The Co-op Innovation Award in Action 

With 30 recipients to date, the Co-op Innovation Award has already had a significant impact nationwide. 

For Co-op Cincy, a non-profit that supports a network of worker-owned businesses in the Cincinnati metro area, receiving its $35,000 award in 2021 made a game-changing new “co-op boot camp” possible. Power in Numbers builds on Co-op Cincy’s preexisting “Co-op U” training program with targeted, Black-led training for teams of Black entrepreneurs launching new cooperatives. Participants spend 14 weeks attending weekly classes and getting the hands-on support they need to get a cooperative up and running. So far, the program has launched cooperative businesses ranging from food trucks to a radio station. 

“We used the Co-op Innovation Award to help individuals from marginalized communities take economic control of their lives, developing co-op businesses that build long-term wealth. The grant funded our 2nd and 3rd iterations of Power in Numbers.

“Our vision and mission is to create a community that works for all — especially those who have been historically underserved —  and it will take all of us to do that. We are really excited to have partners like Momentus Capital,” said Co-op Cincy Co-Director Ellen Vera. 

A handyman working in a workshop wearing a yellow vest
The Industrial Commons (2022 awardee) uses training in sewing and upholstery among other skills to create economic opportunity in small-town North Carolina.

The Industrial Commons is a cooperative in Morgantown, NC, supporting its community by building workforce development. They offer training in a variety of skills, including sewing and upholstery, giving local community members tangible skills and opportunities for wealth building. The Industrial Commons leveraged their $30,000 award to gain a Department of Labor grant, which has funded the work of connecting local youth with their upholstery training.

“This award has been a part of the braid that is forming our overall story. It helped us learn in an active and hands-on way about the furniture manufacturing sector, and helped with learnings that we were able to integrate into our Accelerating Common Economies (co-op training) program, which has served nine communities in cooperative development,” said Aaron Dawson, senior director of Workplace Development at The Industrial Commons. 

The Future of the Award: Supporting Equitable Economic Growth for All 

The Co-op Innovation Award is not just about start-up funding; it’s about fostering a vibrant ecosystem of cooperative businesses that are building a more equitable and sustainable future for all.

“The ongoing legacy of the Co-op Innovation Award is meeting cooperatives and communities where they are and investing in them to determine their future and build wealth for themselves,” said Alison Powers. “Through the award, Momentus Capital will continue to foster peoples’ right to achieve the dreams they have for themselves and their future.”

Co-op Innovation Award: Celebrating 10 Years of Cooperative Movement Building

Impact Investments Obran Coop

Obran is utilizing the cooperative model to not only create a more effective health care system, but also create equity and power for the workers themselves. Facing the need to expand and reach the next level of its operations, Obran turned to Momentus Capital. Momentus Capital’s impact investment team worked with Obran to create a preferred equity investment vehicle to support their vision.

Co-op Innovation Award: Celebrating 10 Years of Cooperative Movement Building

Cooperative Efforts Driving Immigrant Entrepreneurs

Working as an Uber driver for the past eight years, Martin was hoping to make a better life for his family when he moved to the United States in 1991. As costs rose and pay decreased, he began to question whether he could continue on this path. That was when Martin and his fellow drivers began exploring the power of forming a cooperative and using their numbers to take control of their future.

Black and yellow graphic that reads: Community Development Lending Explained: Loan Refinancing

Community Development Lending, Explained: Loan Refinancing

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 fifth installment, we explore an essential financial tool in community development: loan refinancing. 

What is Loan Refinancing?

Loan refinancing in the context of community development involves replacing an existing debt obligation with another under different terms. This strategy is often used to secure lower interest rates, extend repayment terms, or access additional funds for project development. Refinancing can alleviate financial pressure, provide more favorable terms, and free up capital for further investment into community-centric projects. If approved, the borrower gets a new contract that takes the place of the original agreement.

Transforming Communities Through Strategic Refinancing

Refinancing can play a pivotal role in sustaining and scaling community development efforts. It offers developers the flexibility to adjust their financial strategies in response to changing market conditions or project needs, ensuring long-term project viability and impact.

The Benefits of Refinancing

Refinancing offers several advantages:

  • Reduced Costs: Lower interest rates can significantly decrease the overall cost of borrowing.
  • Improved Cash Flow: Extended loan terms provide developers with better cash flow management, enabling them to allocate resources more effectively across projects.
  • Strategic Allocation: Access to additional funds allows for investment in other critical aspects of development, such as predevelopment costs and new projects.

Example: Capital Impact Partners provided a $10 million loan to refinance an existing loan on a 45,252-square-foot property located in Los Angeles. This refinancing was strategically executed to replace the existing loan and secure additional capital for soft costs, predevelopment, and approvals necessary for transforming the property. This loan enabled the conversion of the current vacant buildings into a six-story, 252-unit multifamily, 100 percent affordable apartment building targeting tenants living with low and moderate incomes, addressing the acute demand for affordable housing in Los Angeles.

For community developers looking to maximize the impact of their projects, understanding and utilizing refinancing can be a game changer. By adjusting financial strategies to better suit their needs, developers can ensure the sustainability and expansion of their community initiatives.

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

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

Community Development Lending, Explained: Business 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 fourth installment, we take a look at business acquisition loans, a vital tool in the realm of community development allowing developers to broaden their reach and create lasting impact.

What is a 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. 

Two noteworthy business acquisition loans within the realm of community development, and which we offer at Capital Impact Partners, are cooperative loans, and working capital line of credit loans. One of the most significant steps a business can take is acquiring another business or securing essential working capital. These pivotal moments can be catalysts for growth, job creation, and lasting community impact. 

Unlocking Opportunities Through Cooperative Business Acquisitions: Cooperative Business Loans

Cooperatives have long been champions of community-driven economic development. Whether it is workers seeking to purchase a business from their employer, or a group of farmers joining forces to better serve their local markets, business acquisitions can be a game-changer. 

Business acquisition loans play a vital role in facilitating cooperative ventures, providing the necessary capital to purchase an existing business, and allowing cooperatives to:

  • Broaden impact: acquiring an established business can expedite a cooperative’s growth and its ability to serve the community.
  • Leverage expertise: gain access to experienced staff, established customer bases, and valuable industry knowledge.
  • Ensure stability: preserve jobs, retain local ownership, and maintain the legacy of the business being acquired.

Capital Impact Partners has closed a business acquisition loan to Ward Lumber Worker Cooperative, Inc. (WLWC) to support the acquisition of 100 percent of the capital stock of Ward Lumber Co. (Ward), representing the conversion to employee ownership of the company and all of its assets. The transaction marked the first employee ownership transition, or worker co-op conversion, and the largest of its kind in the North Country region of New York State.

This business acquisition that led to Ward’s conversion to the employee ownership model helps to continue to support the region’s farm and construction industries, provide for above-average employee retention and wages, sustain the future of the enterprise, and build wealth in the community through ownership.

The Lifeline for Day-to-Day Operations: Working Capital Line of Credit Loans

In the ever-evolving world of business, maintaining a healthy cash flow is paramount. Working capital lines of credit are the financial lifelines that enable businesses to navigate the ebb and flow of daily operations effectively. These small-business loans are a type of short-term financing that is used to cover a business’s operating expenses, such as rent, payroll or inventory. 

Working Capital Line of Credit loans offer several advantages:

  • Flexibility: borrow what you need when you need it, providing the agility required to seize opportunities or address unforeseen challenges. 
  • Stabilizing cash flow: ensure that your business can cover operational expenses, pay suppliers, and meet payroll without interruptions.
  • Fueling growth: invest in inventory, equipment, or marketing initiatives that drive business expansion and community impact. 

In 2020, Capital Impact Partners closed on a Working Capital Line of Credit loan to The Achievable Foundation (Achievable), an organization focused on health and wellness, and supportive services for people with disabilities based out of Los Angeles, California. A year prior, a few setbacks had negatively impacted the business including the loss of providers, amongst other difficulties. This line of credit allowed Achievable to replenish their cash and weather the operational challenges that emerged that year. 

Working Capital Line of Credit loans represent a necessary lifeline for organizations such as Achievable, that more often than not find it challenging to receive financing from traditional lending institutions, particularly in rough times. This loan has helped Achievable stay operational, and carry out their mission of serving their communities. 

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: 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, and 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 and 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 and 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 and 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 and 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.

Stay tuned for the next installment in our blog series, where we explore real estate acquisition loans, another type of loan that moves community development projects forward.

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 disinvested and underestimated 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, Ventures Lending Technologies, 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, primarily Black women. 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 and Building Communities of Opportunity

By Ellis Carr, President and CEO

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.

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