In a Nutshell
What: With a low-interest loan from IFF, a new CDFI in Akron has the capital needed to accelerate its impact by making more loans and larger loans to nonprofits and small business owners while leveraging its growing balance sheet to strengthen the community development ecosystem in Northeast Ohio’s Summit County.
Sector: Community Development
Location: Akron, OH
Loan Total: $2 million
IFF Staff Lead: Omar Elhagmusa, Senior Lender – Ohio
Across the United States, more than 1,300 certified Community Development Financial Institutions (CDFIs) are working each day to strengthen under-resourced communities by deploying capital to create jobs; bolster small businesses; support nonprofits; catalyze the development of affordable housing, community health clinics, early childhood education facilities; and more. For every dollar in public funding deployed, CDFIs leverage $8 in private sector investment – helping maximize the financial impact of public sector programs and creating a ripple effect of positive social impact that can be transformative for the communities where CDFIs operate and the people who live in them.
The Development Finance Authority of Summit County knows this well, having spun off a certified CDFI in 2019 after examining new ways to spur economic and community development in Northeast Ohio. After three years focused primarily on establishing a sustainable model and building programming to support it, that CDFI – Western Reserve Community Fund (WRCF) – is now drastically ramping up its operations in Akron, where the CDFI is based, and the rest of Summit County.
Helping WRCF do so is a low-interest, $2 million loan from IFF closed this summer that’s a win-win for both organizations. For IFF, the loan to WRCF represents an opportunity to deepen our investment in Northeast Ohio, to amplify the impact of our capital by supporting a partner CDFI working with borrowers outside of the nonprofit sector, and to strengthen the CDFI industry as a whole. For WRCF, the loan is a significant infusion of capital at a crucial period in the CDFI’s growth trajectory that will enable it to make more loans, make larger loans, and leverage its growing balance sheet to strengthen the community development ecosystem in the region.
“We’ve seen credit tightening up recently, and we have less access to capital than we did a year ago,” says WRCF Executive Director Rachel Bridenstine. “In terms of our work, though, we can’t ease up. We have to do more, because more lending and technical assistance is what’s needed in Northeast Ohio. The loan from IFF is giving us leverage to go out and find additional capital and to bring new partners to the area.”
WRCF supports community-based organizations and small businesses that don’t yet operate at the scale needed to qualify for assistance from the Development Finance Authority, which has historically supported economic development projects of at least $4.5 million. In a city the size of Akron, however, this approach meant an array of community needs went unmet.
Big projects are catalytic in the community, but what about all of the incremental progress that can be made when capital needs are being met and technical assistance is being provided in neighborhoods that are rarely going to have a project that exceeds $4.5 million?
“Big projects are catalytic in the community, but what about all of the incremental progress that can be made when capital needs are being met and technical assistance is being provided in neighborhoods that are rarely going to have a project that exceeds $4.5 million?” asks Bridenstine, rhetorically. “Whether it’s someone trying to buy a building for their barber shop, or a nonprofit that needs a bridge loan to expand its programming while waiting for a grant to arrive, addressing those types of needs has a tangible impact at the community level.”
Toward that end, WRCF has designed a suite of products and services designed specifically with its target market in mind. This includes:
- A general loan fund structured to provide small businesses and nonprofits located in distressed census tracts with flexible loans for projects ranging in size from $50,000 to $500,000, with interest rates capped at four percent;
- A Minority Contractor Capital Access Program that offers lines of credit and technical assistance to contracting businesses owned by BIPOC, women, LGBTQ+, veteran, and disabled entrepreneurs, in partnership with the Akron Urban League, the City of Akron, and Summit County;
- The Summit County Affordable Housing Trust Fund – created in partnership with Summit County – which offers grants and loans to established nonprofits for the creation, development, rehabilitation, programming, and preservation of affordable housing in the county; and,
- The Akron Resiliency Fund – created in partnership with the City of Akron – that provides small businesses located in distressed census tracts in Akron with loans of $10,000 to $70,000, designed to be used for payroll, working capital, refinancing debt, purchasing equipment, and more.
Though currently finalizing its plans for how exactly it will allocate the $2 million in capital from the IFF loan between its programs, WRCF has already determined that facilitating the development of affordable housing will be a major focus as the affordability gap in the region continues to increase. WRCF anticipates supporting a wide range of project types – from affordable single-family homes that foster generational wealth building to multifamily development projects that offer affordable rental housing at scale – to supplement existing development in the area facilitated by Low Income Housing Tax Credits and local housing authorities. And, with American Rescue Plan Act (ARPA) funding from the federal government now flowing to municipalities throughout the country, WRCF is positioned to provide more bridge loans to more nonprofits awaiting reimbursement-only grants funded by ARPA.
We’ve had a wave of nonprofits inquiring about bridge loans recently, and with the influx of capital from IFF, we’re not having to worry about how to support all of them now
“We’ve had a wave of nonprofits inquiring about bridge loans recently, and with the influx of capital from IFF, we’re not having to worry about how to support all of them now,” says Bridenstine. “We’re anticipating making around $500,000 in bridge loans in the next year, which is going to have a significant positive impact in our footprint.”
So, too, will WRCF focus on deploying the capital in service of its equity goals. To date, 70 percent of WRCF’s portfolio is comprised of BIPOC-led nonprofits and BIPOC-owned small businesses – part of a concerted effort to ensure that those who have historically faced the most significant barriers to capital are able to leverage WRCF’s products and services to strengthen their economic outlook and that of their communities. This approach has resulted in tangible outcomes for dozens of borrowers like Queens of Trucking Founder Alease Fleming, who used a WRCF small business loan to purchase a 26-foot box truck needed to get her long-haul trucking business off the ground.
“Queens of Trucking is one example of why WRCF is needed, in that it’s a small business with a great plan that would not have had the startup capital needed to launch otherwise,” says Bridenstine. “The dealership where the truck was purchased wanted a 40 percent down payment and was going to charge exorbitant interest rates over a five-year term. That would have put enormous pressure on the business and really wasn’t tenable. It’s discouraging when that’s what you’re up against when you’re trying to get started, and we’re now able to provide a better option that acknowledges the value of helping BIPOC entrepreneurs build wealth by starting and growing thriving small businesses.”
“The capital from IFF gives us the flexibility to comfortably do more of that and at a larger scale,” adds Bridenstine. “Risk is the name of the game as a lender, and by sharing the risk with IFF through the loan, there’s going to be much more that we’re able to do across all of our programs.”