By Nancy O. Andrews, Ellis Carr, Donald Hinkle-Brown and Joe Neri
As leaders of four of the nation’s largest nonprofit community development financial institutions (CDFIs) with the mission of investing in low-income communities and entrepreneurs, we ask Congress to protect the desperately needed flow of investment capital to America’s struggling cities and towns.
In short, we ask Congress to ensure full funding for the U.S. Treasury Department’s Community Development Financial Institutions Fund (CDFI Fund), whose support enables us and more than 1,000 other CDFIs nationwide to provide patient, innovative capital solutions to help small businesses, expand educational opportunities, and build affordable homes. These investments provide a tremendous bang for the taxpayer buck: On average, CDFIs leverage every federal dollar with at least 12 additional dollars from other sources, including banks, foundations, and impact investors.
CDFI investments in underserved communities promote economic opportunity and inclusive growth.
Last year, $233 million in CDFI Fund appropriations led to more than $2 billion worth of investments and loans across the U.S. Most importantly, this capital has fueled economic growth in thousands of distressed cities and towns, providing economic opportunity for millions of Americans. In 2016 alone, with support from the CDFI Fund, CDFIs nationwide created 36,000 jobs, made 11,000 business loans, and financed 24,000 affordable housing units in urban and rural communities that need it most.
Yet, despite a solid track record of success and consistently strong bipartisan congressional support since its founding in 1994, the CDFI Fund is on the chopping block. The Trump administration’s proposed budget for fiscal year 2018 would eviscerate the CDFI Fund’s vital programs, cutting all but $14 million of its current $248 million budget.
The House voted to restore some of that funding, and although that’s a good first step, we need more than that. The CDFI Fund must continue to operate at full strength. Without the CDFI Fund, small businesses like veteran-owned Honor Capital, which brings affordable grocery stores and jobs to underserved neighborhoods, wouldn’t exist.
Honor Capital’s seven grocery stores in Kansas, South Carolina, Virginia, and Oklahoma have all been financed with CDFI loans. In Wichita and Winfield, Kan., for example, Honor Capital opened two stores that have brought fresh, affordable foods to their communities, created jobs, and attracted new businesses. Each Honor Capital grocery store serves thousands of customers every week.
As part of Honor Capital’s ambitious plan to increase access to healthy foods and support veteran entrepreneurship nationwide, the company will expand to operating a total of 10 stores by the end of 2017, including new stores in North Carolina and Georgia. This growth is made possible by $9 million in innovative financing provided by a partnership of three CDFIs—IFF, Reinvestment Fund, and Enterprise Community Partners. CDFI financing is essential because many start-up and early-stage businesses like Honor Capital have difficulty accessing credit.
In the District of Columbia’s Congress Heights neighborhood, a $14.4 million capital infusion from two CDFIs, the Low Income Investment Fund (LIIF) and Capital Impact Partners (CIP), enabled the Charter School Incubator Initiative to renovate a building that houses two charter schools. Somerset Prep DC and Community College Preparatory Academy serve students in grades six through 12, as well as adult learners. These two schools expand the opportunities for youth and adults to secure high-quality education in their community. Congress Heights, a predominantly African-American and low-income neighborhood, is undergoing pressure from the rapid public and private-sector development in the District. Like other CDFIs, LIIF and CIP are working to ensure inclusive growth by enabling all residents to participate in the revitalization of their community.
The impact of the CDFI Fund’s support goes well beyond dollars and cents.
CDFIs help communities realize their visions of prosperity. They work closely with local nonprofits, businesses, and government to ensure that they are addressing community needs and priorities. They seek out opportunities that traditional financial institutions often overlook: in neighborhoods where median incomes and school test scores fall below national averages, and in businesses like grocery stores that have thin profit margins and higher risk.
CDFI financing is about helping Americans live better lives—through good jobs; safe and affordable housing; access to fresh, healthy foods; high-quality education from early childhood to college; and excellent health care.
America’s cities, towns and rural areas need the CDFI Fund in order to thrive. Congress should ensure that funding for CDFIs is fully restored in the 2018 budget and keep investment capital flowing to vulnerable communities.
Nancy O. Andrews is President and CEO of the Low Income Investment Fund, which is dedicated to creating pathways of opportunity for low income people and communities. Ellis Carr is Capital Impact Partners’ President and Chief Executive Officer and has more than 20 years of experience in the financial services and mortgage industries. Donald Hinkle-Brown is President and CEO of Reinvestment Fund, a national CDFI which integrates data, policy and strategic investments to improve the quality of life in low-income neighborhoods. Joe Neri is President & CEO of Chicago-based IFF, the Midwest’s leading non-depository, diversified Community Development Financial Institution, which focuses on strengthening nonprofits and the communities they serve.
The idea of “community” often conjures images of a geographic place, a shared space where people congregate. While true, communities can be so much more. Their true potential can manifest itself when they foster connections between individuals who share mutually beneficial ideals. Through championing those shared values, community members can create a future of shared prosperity.
This idea of community inspires us here at Capital Impact to look beyond the boundaries of space and place and take action to create ‘communities of opportunity’ built on a foundation of equity and inclusion. In doing so, we can create a network of connections that supports successful outcomes for all.
In an effort to fulfill that vision, we are announcing a new opportunity that allows you to embrace this broader concept of community and support the values that matter to you. Beginning this week, we are offering Capital Impact Investment Notes, the proceeds of which will support investments in underserved communities across the country. I am excited that S&P assigned a long-term issue credit rating of AA to our Notes*, marking the first time an S&P rated Notes offering is being made available by a Community Development Financial Institution on a continuous basis.
For as low as $1,000, you — as an individual or institution — will have the ability to invest in our mission-driven efforts to create jobs, support equitable access to critical services, foster good health and drive economic development — things that our country so desperately needs.
For more than 30 years, Capital Impact has lent to, invested in and developed programs with the residents in underserved communities, communities that traditional lenders are reluctant to support. Central to that effort is our work to partner with and empower communities to identify locally driven solutions that help address their most pressing needs.
I encourage you to read our stories of impact and see that work through the eyes of those individuals in communities who are benefiting from this collective social impact effort. Now you can help us create more stories of positive social change.
This announcementis an important step in providing another way for you to align your investments with your values and truly make a difference in the lives of others.
I hope that you will join us in creating communities of opportunity that break down barriers to success and expand equity for all.
Ellis Carr
DISCLAIMER
This is not an offer to sell or a solicitation of an offer to buy any securities. Such an offer is made only by means of a current Prospectus (including any applicable Pricing Supplement) for each of the respective Notes. Such offers may be directed only to investors in jurisdictions in which the Notes are eligible for sale. Investors in such states should obtain a current Prospectus by visitingwww.capitalimpact.org/invest/capital-impact-investment-notes. Investors are urged to review the current Prospectus before making any investment decision. No state or federal securities regulators have passed on or endorsed the merits of the offering of notes. Any representation to the contrary is unlawful. The notes will not be insured or guaranteed by the FDIC, SIPC or other governmental agency. As of October 16, 2017, the Notes will be offered for sale in all 50 states and the District of Columbia, excluding the States of Arkansas and Washington and the Commonwealth of Pennsylvania.
*S&P Global assigned a long-term issue credit rating of AA to the Notes on September 7, 2017. Please check the current Pricing Supplement at the link above for the S&P credit rating assigned to Notes currently being offered for sale. An S&P credit rating is not a recommendation to buy, sell or hold Notes and may be subject to suspension, reduction or withdrawal at any time by S&P.
By Emilie Linick, Senior Loan Officer, and Quanic Fullard, Impact Strategy Specialist
Capital Impact Partners has long been driven by a mission to help people build communities of opportunity that break barriers to success. To that end, we continually look to expand our lending and incubate, scale, and advocate for new ideas that advance community development for those most in need.
By Ellis Carr, President and CEO and Scott Sporte, Chief Lending Officer
Note: This Op-Ed originally appeared in the publication Capital Weekly.
According to the U.S. Census Bureau’s report The Supplemental Poverty Measure: 2015, nearly eight million people in California were living in poverty in 2015. The report indicated that the state’s poverty rate was 20.6 percent—well above the national rate of 15.1 percent—and surpassed the rates of every other state in the nation.
2016 was marked by change—both for the U.S. and for Capital Impact. Our country witnessed a transition in leadership and with it words and actions that have divided our country. Part of this division included the voices of many who felt the American Dream had passed them by.
We have had a strong year in our lending work, where many of our newest initiatives gained momentum and had tremendous impact in the communities we serve. As witnessed in our 2016 Annual Report, we delivered $118 million in financing through our core lending work that supported community-based health care, high-performing charter schools, innovative approaches to services for seniors, mixed-income housing and access to fresh, healthy foods.
Capital Impact Partners ended 2016 in an extremely strong financial position with unrestricted net assets increasing by $2.4 million. As illustrated in our 2016 Annual Report, our loan portfolio grew by $26 million or 15%, and total assets grew by $42 million or 15%.
Earnings from new business totaled $2.3 million, as we continued to focus on expanding our business across sectors as well as expanding our national footprint. This asset growth reinforces the idea that a strong social-focused mission can be successfully coupled with a strong balance sheet.
Capital Impact’s solid financial results were largely driven by our lending activities. We ended 2016 with $118 million in loans closed, while the credit quality of our portfolio remained extremely strong. Our Chief Lending Officer Scott Sporte wrote about some of those lending highlights in his 2016 retrospective.
One of our major 2016 accomplishments is receiving a AA with Stable Outlook rating from S&P Global. This rating — in addition to our 4-star, Triple A, Policy Plus Aeris rating — recognizes our strong robust asset quality and liquidity, minimal risk profile and consistent growth in loans and assets. The rating also improves our ability to access financial tools, allowing us to respond even more quickly to gaps we see in community investment as well as amplify our social impact.
Another highlight was a $70 million New Markets Tax Credit allocation from the U.S. Department of Treasury’s CDFI Fund. This will allow us to further incentivize private sector investors to partner in financing projects that increase access to critical social services in distressed communities, spur economic development and create jobs. Capital Impact will utilize this new allocation to finance high-impact projects in cities like Detroit, Los Angeles and Richmond, CA.
In looking forward to 2017, we will continue to leverage capital through our membership in the Federal Home Loan Bank of Atlanta and new proceeds issued through the CDFI Fund sponsored Bond Guarantee Program.
In addition to these efforts, we will continue to innovate as we seek other forms of flexible capital to support longer-term projects throughout our sectors and geographic footprint.
Solidifying our firm financial footing will support the organization as we refine and focus on the goals set in our 2020 strategy. Doing so will guide us toward fulfilling our worthy and ambitious mission in communities across the nation.
S&P Global evaluated our financial condition, operational performance, policies, and risk management strategies by analyzing published reports, internal data, and information collected through interviews and discussions with Capital Impact’s management team.
Pursuing a credit rating supported our desire to expand our work across the country and respond quickly to investment gaps that healthy communities require. This rating helps advance our ability to broaden our investor base with socially motivated impact investors and establishes our credibility with mainstream investor markets by demonstrating our creditworthiness with transparency and authority.
In addition to being just one of five Community Development Financial Institutions who have received an S&P Global rating, our financial strength and impact in communities has been recognized by Aeris, the CDFI ratings agency. We have consistently received Aeris highest ratings for our social impact, policy leadership, and financial performance.
Combined with our ‘AA’ S&P Global rating, this recognition reaffirms our more than thirty years of work to deliver capital and commitment to underserved communities nationwide. Equally important for me is that this recognition truly illustrates that we do not have to make a choice between a strong balance sheet and driving social change.
I could not be prouder of our team and partners who have helped made this possible and look forward to working with many of you in the coming year as we implement our 2020 strategy and work to build communities of opportunity that break barriers to success.
As I close out my first year as Capital Impact Partners’ president and CEO, I find myself incredibly humbled and inspired to be part of a movement that is focused on improving the lives of those in communities across this country.
While we continue to make meaningful progress, the results of our Presidential election highlighted incredibly important issues. Individuals across this country – on both sides of the political aisle – made clear their feelings of disenfranchisement. These concerns about equity, opportunity, and access to quality social services touch all of us.
It is certainly a sentiment we share, and one that we’ve been working to address for the past three decades. Yet, as the political landscape changes and policies evolve, we must continue to challenge ourselves to find new ways to push farther and go deeper.
Driven by another year of strong lending, Capital Impact ended 2015 with a solid financial position. The organization’s overall portfolio increased by $22 million or 11 percent. This growth was matched with continued strong credit performance, as our delinquency rate was just 0.4 percent. Once again, our focus on financial strength and social impact was rewarded with AERIS’ highest possible rating of AAA+1. This honor pleases us greatly.
Top-line revenue continued to grow as well. Net income rose by $11 million — a year-over-year increase of 213 percent. Net assets saw an expected decline as a result of launching our Green House and Cornerstone Partnership programs and the accompanied grant revenue that was used to fund those activities.
We will continue efforts to strengthen our financial position by bringing our lending more on balance sheet, actively managing expenses and implementing capitalization strategies to improve margins.
Our 2020 Vision for Communities
We will continue to develop and diversify our capital base by building on our Federal Home Loan Bank of Atlanta membership to scale access to flexible capital. Also, we will explore ways to attract impact investors as a means to bolster our social impact while allowing for the ability to provide relevant returns to investors.
We have seen incredible success with these types of programs that raise capital for international projects. And, we intend to harness that same interest domestically as a means of creating access to the critical services that communities need to thrive. Ultimately, we believe these efforts will help us in expanding our reach and impact by 2020.
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ding work, where many of our newest initiatives gained momentum and had tremendous impact in the communities we serve. As witnessed in our 
