As a real estate developer looking to deliver social impact, the process of finding and engaging with a lender can be hard. Once your mind is set on starting a community development real estate project, who do you turn to? Where do you find them? What is the process like?
As part of the Momentus Capital family of mission-driven lenders, Capital Impact Partners – a certified Community Development Financial Institution (CDFI) – provides flexible and affordable loans of $650,000+ ($350,000 under special circumstances) to finance key community pillars, including health centers, education facilities, food retailers, affordable housing, small businesses, and cooperatives.
We are a national lender, capable of providing loans across the country, but we also have a place-based focus in specific regions, including California, Michigan and northwest Ohio, the New York Tri-State Area, the Southeast, Texas, and the Washington metropolitan area.
We know you have got questions about the community development real estate process. To help get your process started, we offer some answers here about working with a CDFI lender.
1. When in the development process should I start working with a CDFI lender?
It is never too early to start gathering information from lenders, but you’d ideally want to get started when you are about six months from starting construction.
By then, you would have a good estimate for the timing of obtaining permits and starting construction.
CDFIs such as Capital Impact Partners will work hand in hand with real estate developers looking to deliver social impact
2. What types of reserves will a CDFI lender require?
Lenders will have contingencies on your project that may go above and beyond what you have budgeted; usually 7.5-15% of hard costs expenses and 5% of soft cost expenses.
If you are capitalizing interest during construction, which is recommended when there are no operations ongoing during construction, that will need to be included in the overall project budget.
Once construction is completed, there may be lease up reserves, debt service reserves, and/or facility maintenance reserves.
3. Where does the capital that CDFIs lend come from?
CDFIs serve as capital aggregators that attract capital from the market, banks, government sources, and foundations.
4. Will a CDFI lender hold the loans or will they sell them?
CDFIs do both. At Capital Impact, if they are sold, we ensure that there is no impact on the Borrower’s experience or relationship.
5. What influences CDFI lenders’ rates?
Primarily it is the Treasury rates, unless the CDFI has a sector/geographic fund that is independent of Treasuries.
6. Who approves the loan and how does the loan committee work?
CDFIs have groups that review deals. Capital Impact has an internal credit committee that reviews deals on a weekly basis.
Some CDFIs or specific loan products require external review and approval. Underwriting packages must be submitted at least a week in advance to receive approval the following week.
The committee cares about the financial strength of the transaction, the deal fitting into our established credit guidelines, and the impact of the transaction on the community.
8. Who will be my main contact for loan closing and will it change afterwards?
You may first interact with a business development officer or someone with a similar position, who will be the initial point of contact until a term sheet is signed.
Then you’ll speak with a loan officer who will underwrite your transaction until it is approved.
Once approved, a legal and closing team will drive the process, but the loan officer will remain involved to ensure the loan is closed according to what was agreed to with the borrower and as outlined in their underwriting.
9. As a non-legal person, how do I review a loan agreement?
Consider seeking legal counsel to review a loan document. But generally, check that the interest rate, fees, and dates match your understanding. Check the reporting and financial covenants to ensure you can meet them.
10. What should I do if I think I am going to default on my loan?
Tell your lender as quickly as possible. CDFIs are lenders with a mission to provide fair, responsible financing, and they will work closely with you when things are tough. Another very important element to take into consideration when looking to establish a relationship with a community development real estate lender is that lender’s value system. You have the right and responsibility to vet the lender to make sure that their values, goals, and philosophies align with yours. It is a two way street and any conversation about funding should be as much about the entrepreneur evaluating the funder as the funder evaluating the entrepreneur.
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.
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
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.
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.
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.
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.
Abner Mason came up with the idea for SameSky Health in 2013 with a dream of creating a company that is on a mission to advance health equity. From its inception, SameSky Health has been focused on engaging and helping Americans who are marginalized or under-resourced.
To advance that mission, Mr. Mason worked with Momentus Capital, a family of mission-driven organizations that includes Capital Impact Partners, CDC Small Business Finance, and Momentus Securities. Through our impact investing program, SameSky Health received a $5 million venture debt bridge loan to support the growth of the company. We talked to Abner about how this investment is helping SameSky Health in its efforts to address a significant market challenge to help disinvested communities get guidance and navigate a complex health care system.
Q: What do you feel you have achieved the most since starting the company?
Abner: I’m very passionate about the mission of SameSky Health, to create cultural connections for a healthier, more equitable world. I feel fortunate to have built a company where people who are just as passionate as I am about our mission have joined the organization. We’ve built a team of incredibly talented people who are focused on creating a solution that enables equitable health care.
Health equity is at the center of everything SameSky Health does. We have established ourselves as a leading health equity company. We are focused on raising the bar in America for health equity and how we should treat the people we are trying to help navigate our complex health care system.
We have built a leading, scalable health equity technology platform, unlike no other, that enables health plans and other health care stakeholders to comply with new health equity-related requirements that they will have to comply with now and in the future.
Q: The need for funding means that you’ve achieved a certain amount of growth. What challenges/barriers have you faced in terms of attaining funding for SameSky Health?
Abner: One of the major challenges I have run into over the course of my career is trying to raise money as a founder of color. I am optimistic about the future, as I have seen great progress being made from investors in startups supporting new businesses founded by people of color, which has more than doubled since 2020.
Another challenge I have faced in the past is gaining support from investors to raise funds for a solution that addresses low-income, underserved communities, particularly those people who are enrolled in Medicaid. Up until recently, venture capitalists did not understand the Medicaid market or the extraordinary need for advancing health equity. I am very optimistic about the traction in investment and innovation in this space over the past two years to help address health disparities.
Q: Momentus Capital, however, is able to offer something that hopefully can make an impact with a lower risk. Any thoughts on that relationship so far?
Momentus Capital is essential for a company like SameSky Health. The company played a crucial role in helping SameSky Health secure bridge funding as we progress to raise our Series C funding, which is the next step. We are deeply grateful for their flexibility and support of SameSky Health.
Momentus Capital is essential for a company like SamSky Health. [They] played a crucial role in helping us secure bridge funding.
– Abner Mason, Founder & CEO SameSky Health
Q: Why did you choose Momentus Capital versus another investor? What was the difference maker for you?
Abner: It was clear to us that Momentus Capital values working with partners to impact change in the health care system and drive health equity. This aligns well with our values and mission. Their approach allowed us to easily structure a deal that was fair to everyone given our alignment around advancing health equity. Momentus Capital stands out from others for their flexibility in working with our team and their ability to quickly move toward a transaction to help us continue scaling and driving equity in health care.
Q: How do you think SameSky Health improves the lives of people in the community through health care, and how does proper investment into funding drive these positive aspects?
Abner: SameSky Health has built an innovative solution that combines technology and human touch to deliver a culturally tailored, personalized experience to members of health plans. If the health care industry continues to try to address challenges the same way they always have, we’ll never achieve better outcomes. Innovation and investment in health care IT innovations are so important. Investors need to support startups that are building solutions that will meet the needs of low-income, underserved communities. Investors need to be more proactive in seeking opportunities to work with companies such as SameSky Health.
Healthy communities are built by their residents. Small business owners, local real estate 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, their residents — and our country — thrive.
Unfortunately, leaders in communities all across the country are missing a key ingredient to success: access to the capital. For too long, many communities have been denied the types of capital and support they need to realize the dreams they have for themselves, their families, and their neighborhoods.
In 2019, Capital Impact Partners and CDC Small Business Finance began an incredible journey with an ambitious — some might say audacious – goal: to devise new, transformative ways to meet the capital needs in communities across the country. We asked ourselves a question: How does the financial sector — including mission-driven financing organizations in our sector — need to change to really support communities? What can we do differently to help our communities really thrive?
On behalf of the entire team at Capital Impact Partners and CDC Small Business Finance, I want to express my deepest sorrow at the passing of Chuck Snyder.
Chuck joined the National Cooperative Bank (NCB) in 1983 before being named as President and CEO in 1992. The organization that came to be known as Capital Impact was originally created as a division of NCB in 1982, which means that Chuck has been a part of our journey since the very beginning.
His passion and tireless efforts to support the cooperative movement were immeasurable. In addition to his own role at NCB, Chuck sat on numerous boards for co-op organizations. This included serving on Capital Impact’s board from 2010 to 2018.
Chuck openly shared his experiences, and the guidance and counsel he provided as a colleague, a board member, and a friend helped strengthen Capital Impact’s own efforts to support cooperatives. We will remember how incredibly supportive he was of our desire to grow the business to help more people through cooperatives and other community development efforts. This included our most recent partnership with NCB around the Co-op Innovation Award, supporting the next generation of cooperative leaders.
That dedication resulted in Chuck receiving the Jerry Voorhis Award, the National Association of Housing Cooperatives’ most prestigious honor. He was then inducted into the Cooperative Hall of Fame and this video serves as a wonderful tribute to his body of work.
This is a considerable loss for those of us in the cooperative and mission-driven lending spaces, but the memory of what he has helped accomplish serves as an inspiration for all of us looking forward.
Chuck also was a strong believer in family and he constantly reminded me to put family first, always. Please join me in offering thoughts and prayers to his wife and two daughters.
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