Better Together: How FQHCs and CDFIs can leverage COVID-19 Relief Funds November 9, 2021

By Jose Cerda III, Vice President of External Affairs


Since the start of the COVID-19 pandemic, both Federally Qualified Health Centers (FQHCs) and Community Development Financial Institutions (CDFIs) have been on the frontlines of helping the communities most impacted by the devastating health and economic consequences of this disease.

FQHCs – community-based health centers that provide affordable and accessible health services in medically underserved communities – have been essential in providing care, testing, and vaccines to our hardest-hit and highest-risk communities. Chicago’s Lawndale Christian Health Center, for example, converted a community center into a vaccination site that served thousands of area residents; and St. Louis’ CareSTL Health expanded its services to provide free, mobile COVID-19 testing throughout the city, including through pop-up sites in partnership with other community-based organizations.

CDFIs – community lenders that serve essentially the same communities – have acted as financial first responders, ensuring the continued flow of capital during this time of uncertainty. At the start of the pandemic, for instance, IFF pivoted most of its lending team to make sure that nonprofits could access the emergency loans and grants being made available to businesses through the federal government’s Paycheck Protection Program (PPP). Also, we deployed capital to other CDFIs to help them do the same.

In addition, we reached out to all our nonprofit customers to see how the pandemic was affecting them.  In some cases, we made temporary loan modifications to help get them through the worst of the crisis; and in other cases, as with Family Christian Health Center in south suburban Chicago, we refinanced existing debt to free up additional resources for nonprofits to meet the needs in their communities.

As a result, the need for both FQHCs and CDFIs has never been more evident, and the opportunity for the two to work together has never been better.

CDFIs – community lenders that serve essentially the same communities – have acted as financial first responders, ensuring the continued flow of capital during this time of uncertainty.

COVID-19 Relief Funds

In recent months, the federal government has provided COVID-19 relief funds that open the door for FQHCs and CDFIs to work together to increase their community impact.

For starters, this spring, the U.S. Department of Health and Human Services’ (HHS’) Health Resources and Services Administration (HRSA) announced more than $7 billion in funding for FQHCs. In April, the first $6.1 billion of this funding was awarded to nearly 1,400 FQHCs to support their COVID-19 response, with up to $500,000 of these funds eligible to be used for minor renovations to expand existing capacity.

Then in September, HRSA followed this up by awarding an additional $1 billion for FQHCs to invest in capital projects – including the construction of new buildings, and the expansion or major renovation of existing facilities. Ranging from $500,000 to over $3 million, these grants also could be used to leverage other funding sources – opening the door for more ambitious and impactful community investments.

But how could FQHCs, which have seen their business models and budgets turned upside down during the pandemic, find ready financing to take full advantage of this new funding?

Here’s where CDFIs come in to play.  This summer, the U.S. Department of the Treasury awarded $1.25 billion to 863 CDFIs, providing them with an infusion of flexible capital to help communities respond and recover from COVID-19, including working with FQHCs and other nonprofits.

(Note: At the time of this posing, Congress and the President are on the verge of approving an additional $1 billion in capital funding for community health centers through the Build Back Better Act)


How FQHCs and CDFIs Can Work Together

CDFIs come in many shapes and sizes, but most offer a range of financial products and development services to help FQHCs plan, build, and finance the quality facilities they need to meet their missions. And some CDFIs, like the 25 members of the Lenders Coalition for Community Health Centers, of which IFF is a founding member, don’t just specialize in financing health centers, they also advocate for public funding and policies to support their growth and financial strength. CDFIs like these can help FQHCs with their facilities projects in several ways, including:

— Flexible lending. Building a new health center or renovating an existing one can be expensive. Quality community-based health centers require complex facilities that must meet state and federal standards, and can include urgent care capacity, hospital rooms, medical and dental equipment, and more. Inevitably there are funding gaps between an FQHC’s cash on hand, public and private funding sources, and total project costs. CDFIs can mitigate these funding gaps, as well as provide bridge financing until these funds become available.

Also, CDFI loan products are designed to meet the specific needs of FQHCs. IFF’s non-appraisal-based lending enables health centers to secure financing for their projects without the need to solve for the artificially low market values of real estate in historically disinvested communities. These loans are based on an FQHC’s cashflow and ability to pay – not on the appraised value of the underlying real estate. For IFF, understanding an FQHC’s business model matters more than the recent sale prices of other commercial properties in their neighborhood.

— Real estate consulting. Whether it’s renovating an existing facility, constructing a new health center, or planning for the future, making decisions about facilities is never easy.  It requires thinking through program needs, analyzing costs, understanding financing, finding a suitable location, managing construction, and more. FQHCs also must consider the needs of the clients and communities they serve and ensure that their facilities are designed to meet these needs. Every square foot matters and contributes to an FQHC’s mission as well as its bottom line.

Overseeing a real estate project from start to finish is a huge commitment, too. “The idea that we can take the busiest people at an agency and give them another full-time job to do is just plain foolish,” writes Joe Neri, IFF’s CEO. “We need to re-think how nonprofit facility development is done by taking that stress off nonprofit leaders’ backs.”

CDFIs come in many shapes and sizes, but most offer a range of financial products and development services to help FQHCs plan, build, and finance the quality facilities they need to meet their missions.

CDFIs like IFF can assist with these decisions.  We have a team of real estate professionals that has completed over 700 projects representing more than 4.2 million square feet of space, and which can work with FQHCs at every stage of facility development – from the initial planning and predevelopment, to the design and construction, to the final punch list and ribbon cutting.

CDFIs also can help FQHCs tap into other tools to finance large capital projects, including:

  • HRSA’s Health Center Loan Guarantee Program. To facilitate access to capital and help reduce lending costs, HRSA can provide a federal loan guarantee of 80 percent – with no maximum amount – on loans to FQHCs embarking on new construction or major renovations.  CDFIs were instrumental in establishing this program and improving it through the years, and they can help FQHCs to apply when underwriting their loan.
  • New Market Tax Credits (NMTC). The NMTC provides a federal tax credit totaling 39 percent over seven years for investments in certain low-income census tracts – and can provide millions of dollars in equity capital to FQHC projects. CDFIs have been at the forefront of leveraging NMTCs to grow the nation’s network of community health centers, and they can provide them directly to FQHCs (if they have a recent allocation) or help to identify them from other sources.

With their deep knowledge about how FQHCs operate, years of experience underwriting health center projects, and shared mission of serving the same communities, CDFIs are natural partners for FQHCs ready to take on capital projects.