#39: Community Development Finance: Yes, It’s Part of Your Job Too!

Once you have a good understanding of the technical aspects of the CRA and have stabilized your CRA program, now it's time to expand your reach into the community. Oftentimes, that will involve working alongside various stakeholders, who care deeply about serving lower income and disadvantaged communities. When working in community, you will likely be invited to participate in community redevelopment initiatives and, of course, financing will be part of that conversation! If you ask 10 bankers how they would define community development financing, you will likely get 10 different responses. As a general framework, community development finance involves economic growth in which people come together and make decisions to organize and pool assets and resources for the purposes of addressing unmet credit needs and opportunities. Let’s take a deeper look at pooling assets and resources for addressing unmet credit needs. In a simplified capital stack, you’ll see that conventional debt (otherwise known as conventional financing or bank debt) is at the foundation. If a bank can originate a deal, it will; however, you often will need to bring extra resources to the table to make the deal work. That is where you come in. Your job is to know about these various sources and work with the bank to consider partnering with a CDFI or bringing more equity sources to the table. In complex deals, sometimes there are more than 10 equity sources layered in with a CDFI enhancement (or first loss position) and conventional debt. I hope this gives you a glimpse into the world of community development finance. Remember: community development finance is deployed in partnership with community stakeholders who bring varied resources to the table to address challenges and barriers that can not be overcome by one bank or stakeholder alone.Quotes• “It’s very important that you understand that the most productive and powerful community development initiatives require many people coming to the table and various levels within the capital stack to make the deal work.” (04:48-05:06)Want to learn more about the CRA? Sign up for CRA Today’s free course: https://hub.cratoday.com/freecourseLinksConsumer Compliance Handbook (Page 852-854): https://www.federalreserve.gov/boarddocs/supmanual/cch/cch.pdf CRA Today Website: https://cratoday.com/ For more information on the CRA Hub, a membership for bankers to connect, inspire, and master the art of CRA: https://cratoday.com/hub/ Copyright © 2021 by CRA Today LLC(No claim to original U.S. government material)All rights reserved. No part of this podcast may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.This podcast is a periodic publication of CRA Today LLC and is intended to notify and inspire recipients of new developments in the Community Reinvestment Act. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.Podcast production and show notes provided by HiveCast.fm