Dear Opportunity Finance Advocate,

Transcription

1 Dear Opportunity Finance Advocate, The opportunity finance movement aligns capital with justice. It is composed of mission-driven community development financial institutions (CDFIs) working across America in low-income, lowwealth, and other disadvantaged communities to provide greater economic opportunity and access. We believe everyone deserves an opportunity and that justice for all begins with opportunity for all. The enclosed information packet includes background material on the opportunity finance industry and Opportunity Finance Network (OFN), the leading national CDFI network. CDFIs, part of the growing opportunity finance movement, offer countless pathways for students, professors, and administrators to work side by side in aligning capital with social, economic, and political justice. In this packet, there is a wealth of resources about all things opportunity finance, including a sample OFN Member CDFI profile, inspirational success stories about CDFI borrowers, and industry career placement information. Students and professors may be particularly interested in the model case study provided in this packet. Here, students can work with their peers and professors to discuss real-life issues impacting disadvantaged communities and the innovative ways CDFIs find solutions and bring opportunity to those challenges. Further opportunities for jobs and internships in the industry are also available in the packet a valuable resource for students and career counselors alike. After reading this packet, we ask you to join us. If you are a Student: talk to other students about the opportunity finance movement. Utilize the case studies in your classes and clubs. Check out the many job and internship opportunities. Professor: encourage students to become more involved in the opportunity finance movement. Use the case study as a starting point to introduce students to existing strategies that help align capital with social, political, and economic justice. Contact Beth Lipson, Executive Vice President of Strategic Initiatives, at [email protected] for more information or with questions. Career Counselor: advise students of all majors on the different opportunities for students to work in this industry. Contact Tamara Frye, Senior Associate of Human Resources, at [email protected] for more information. University Administrator/Trustees: consider investment and/or partnership opportunities with CDFIs. Contact Fran Lutz, Chief Financial Officer, at [email protected] for more information. We thank you for your interest in the opportunity finance movement and your desire to help align capital with justice. Please do not hesitate to contact us with any further questions. Sincerely, Opportunity Finance Network

2 The Opportunity Finance IndusTry LEARN JOIN Community development financial institutions (CDFIs) are private financial institutions that are 100% dedicated to delivering responsible, affordable lending to help low-income, low-wealth, LEAD and other disadvantaged people and communities join the economic mainstream. CDFIs are opportunity investors. We create opportunities and provide resources to help people act in the best interests of their communities, themselves, and future generations. By financing community businesses- including small businesses, microenterprises, nonprofit organizations, commercial real estate, and affordable housing- CDFIs spark job growth and retention in hard-toserve markets across the nation. CDFIs are active across the United States, and finance diverse projects, such as charter schools in California, affordable housing developments in Chicago, community health centers in New York, and rural fisheries in Maine. In addition to financial assistance, CDFIs provide technical assistance in areas like business planning. LEARN JOIN LEAD About the Opportunity Finance Movement In Providing Opportunity. For All. As the industry grows, there are new and endless ways to become involved in opportunity finance. In this packet, you will find further information about Opportunity Finance Network, CDFIs, job and internship opportunities, a list of available resources, and sample case studies about real issues that CDFIs face. We encourage everyone, students and professors alike, to take advantage of these resources and learn more about opportunity finance, its impact, and the role that you can play. impact: 597,011 jobs created or retained through small business and microenterprise 961,909 affordable housing units constructed or renovated 9,976 community service organizations financed

3 LEARN JOIN LEAD the Charge. Be a part of aligning capital with justice in underserved communities. Students: spread the word about opportunity finance to your peers and check out the many jobs and internships available. Professors and educators: contact Beth Lipson, Executive Vice President of Strategic Initiatives, at [email protected] for more information about introducing opportunity finance to the classroom. For more information on career opportunities at Opportunity Finance Network, contact Tamara Frye, Senior Associate of Human Resources at [email protected]. If you are interested in investment opportunities in CDFIs, contact Fran Lutz, Chief Financial Officer, at [email protected] for more information. About Opportunity Finance Network OFN is the leading national network of CDFIs investing in opportunities that benefit low-income, low-wealth, and other disadvantaged communities across America. OFN partners across the public and private sector with foundations, banks, corporations, and government agencies to provide innovative solutions and to scale capital into larger investments. OFN offers industry-leading advocacy as well as financing, consulting, research and marketing support for CDFIs and their partners. OFN Members are performance-oriented, responsible investors that finance community businesses, spark job growth in the areas that need it most, and deliver both sound financial returns and real changes for people and communities. OFN Members have originated more than $33 billion in financing in the last 30 years in urban, rural, and Native communities.

4 Interested in a Career in the Opportunity Finance Industry? Opportunity finance professionals utilize quantitative, analytic, business, and technical skills to generate a tremendous social impact. Learn more about this $40 billion industry, its impact, and career opportunities for students. Innovative Market-Based Financial Solutions The opportunity finance industry is one of the most innovative and effective forms of social enterprise. It provides capital and financial services that benefit low-income and low-wealth people building homes, schools, small businesses, and community facilities; creating jobs; opening new markets; and helping people join the economic mainstream. The opportunity finance industry includes more than 800 mission-driven Community Development Financial Institutions (CDFIs) and their partners working across the United States. CDFIs are private-sector financial intermediaries that serve low-income, low-wealth, and other disadvantaged communities. Combining innovation and determination, Opportunity Finance Network (OFN) Member CDFIs have invested more than $33 billion in the last 30 years in urban, rural, and Native markets. Performance-Oriented Lenders In the current financial markets, mainstream lenders have tightened credit for all but the most qualified borrowers. CDFIs address this gap by providing flexible, market-driven products to consumers, developers, and small businesses that are shut out of the financial mainstream. Yet CDFIs apply financial rigor and discipline in lending to underserved markets. As a result, most CDFIs are profitable (but not profit maximizing). CDFIs have historically maintained a net charge off ratio of just 1.1%, which is comparable to the rate for FDIC-insured institutions.

5 Responsive to Community Needs The opportunity finance industry is diverse. Individual CDFIs focus on the unique market conditions of the communities in which they operate. In FY 2013, CDFI end-borrowers and beneficiaries were 61% minority, 48% female, and 74% low-income. The cumulative impact of the OFN network includes: 597, ,909 9,976 Jobs created or maintained via small business and microenterprise 2012 OFN Member survey data. Career Opportunities Career opportunities within the CDFI Industry are available in the following areas: n Lending and Investing n Technical Assistance and Consulting to Borrowers n Development and Capitalization n Advocacy and Research n Finance and Administration n Marketing and Communications A career in the opportunity finance industry provides an opportunity to: Affordable housing units constructed or renovated Community service organizations financed n Have an Impact Employees of CDFIs can see the tangible impact they create in local communities. The work they do creates businesses, jobs, stable homeownership, and community services among populations overlooked by traditional financial institutions. n Develop Tangible and Portable Skills Career opportunities within the opportunity finance industry provide high-level, hands-on experience with financial analysis, consulting, communications, community organizing, coalition building, and more. CDFI professionals are in high demand in geographies across the country, from Boston to Birmingham to the Bay Area. n Establish a Network CDFIs are an integral part of the opportunity finance industry, and are significant players that work closely with public sector, private sector, nonprofit, and foundation partners including the U.S. Treasury Department, Goldman Sachs, Bank of America, and the Ford Foundation. Building relationships with organizations such as these is a critical activity in many types of CDFI careers from lending to development to advocacy. Resources Find industry news and resources at OFN is the leading network of more than 200 performance-based CDFIs that deliver responsible lending to help low-wealth and low-income communities join the economic mainstream. n Find a local CDFI that may have available job or internship opportunities using OFN s CDFI locator. n Join the Community Development Banking Listserv the go-to resource for employers and recruiters to post job and internship openings. n Find a Job by searching OFN s Industry Job Bank.

6 Opportunity Finance Network Member Profile Chi Ishobak Financial and Social Impact n Total amount disbursed for small businesses: $333,000 n Total amount disbursed for transportation and credit-building: $280,000 n Total loans originated: 50 n Jobs created: 15 n Consumer debt eliminated: $23,000 Chi Ishobak, Inc. is a Certified Native Community Development Financial Institution. Established in 2009 as a 501(c)(3) non-profit corporation in Michigan, it serves the citizens of the Pokagon Band of Potawatomi Indians, a federally-recognized Indian tribe located in Michigan and Indiana. Chi Ishobak s mission is to provide economically-disadvantaged tribal citizens with access to affordable capital for business loans and individual financial development through collaborative and education-oriented lending services, while practicing responsible lending in order to protect loan capital for future generations of tribal citizens. Chi Ishobak s financial products consist of: a commercial loan program, which provides capital to tribal entrepreneurs for small-business start-up and expansion, and a consumer loan program, which provides capital to tribal citizens to purchase automobiles and to build/repair credit. Its developmental services consist of the financial wellness program, small business development assistance, and an individual development program. Success Story: Bicycle Tatooing, LLC, South Bend, IN Contact David Martin is an extremely talented artist whose dream was to own his own business. In 2012, with the support of the Common Council of Downtown South Bend, Indiana and local institutions, he incorporated Bicycle Tattooing, LLC. However, David s personal investments were not enough to finance a new business. David approached Chi Ishobak for financing, and it provided the remainder of Bicycle s start-up financing, enabling David to finish his build-out and receive approval from the City of South Bend and the Health Department. Bicycle Tattooing is the only high-end custom tattoo gallery in the area, and is now booked well in advance. 415 E. Prairie Ronde St. Dowagiac, MI P: E: [email protected] We Believe In Opportunity. For All. OFN.ORG

7 Willapa Hills Cheese Produces Natural and Preservative-Free Goods Stephen and Amy Hueffed always knew they wanted to start a family together. What they decided after they were married was that they wanted to start a business together, as well. The couple had different professional backgrounds Stephen was in youth ministry and Amy in alternative medicine- but both were passionate about cheese and dairy farming. So in 2005, the Hueffeds established Willapa Hills Cheese on a farmstead in southwest Washington. The familyoperated dairy farm and cheese producer focused on sheep and cow s milk cheeses, and artisanal spreads. Due to a changing economy and consumer demand, Stephen and Amy knew that to sustain their business longterm, they had to expand production. However, this kind of growth required working capital that the Hueffeds didn t have. The couple explored financing options, but traditional lenders were unable to provide a loan to the new, unproven business. A local referral group, SlowMoney NW, connected them to CDFI Craft3. Craft3 saw Stephen and Amy s passion, determination, and the quality of their award-winning products. It also believed in Willapa Hills commitment to sustainable agriculture and conservation. In November 2013, Craft3 provided Stephen and Amy with $75,000 for working capital and equipment purchase, which allowed Willapa Hills to boost production of their natural and preservative-free products.

8 Case Study Primer Opportunity Finance Network is the leading national network of community development financial institutions (CDFIs) investing in opportunities that benefit low-income, low-wealth, and other disadvantaged communities across America. We ve prepared a real-life CDFI case study for use in multiple settings to highlight typical work in the industry that helps eliminate poverty and align capital with justice. Purpose of a Case Study: Case studies provide students and professionals the opportunity to apply their knowledge to develop solutions for realistic, complex problems. They allow for individuals to explore realworld issues experienced in the workforce. Case studies can also be used in case competitions and case walk-throughs. In case competitions, teams compete to identify solutions to problems and present in front of a panel of judges. Prizes for top teams include monetary rewards, accelerated interviews, or the opportunity to implement their solutions. A case walkthrough contains many of the same elements of a case competition, but is used more for instructive purposes, with facilitators assisting the teams in developing a solution. Practical Uses for a Case Study: 1. Classroom Settings a. Challenge students to critically analyze a situation b. Generate classroom discussions c. Teach students about common issues in an industry or field of study 2. Club Activities a. Provide a unique look into an industry b. Foster collaborative and team-based activities 3. Career Development a. Conduct a case walkthrough b. Promote analytical skills needed in workforce UpLift Solutions CDFI Case Study: The UpLift Solutions case study shows how a New Jersey-based CDFI designed and created a lending policy to support its newly launched lending programs, aimed at eradicating food deserts and ensuring access to fresh, affordable food in underprivileged communities. Organizing Your Own Case Walkthrough or Competition 1. Leverage Your Connections a. School officials and campus club leaders b. Co-sponsor with local businesses 2. Bring in Local Expertise a. Contact a local CDFI to help with the case study 3. Create Tangible Benefits a. Icebreakers, food, engaging activities b. Networking with local employers

9 Case Walk-Through: UpLift Solutions, Inc. Organization Overview: UpLift Solutions (UpLift) is a New Jersey-based, national nonprofit organization that provides lending and development assistance programs to underserved communities and businesses to help eradicate food deserts in America. UpLift supports food businesses, government agencies, and nonprofits to create sustainable, healthy environments for low-income, underserved communities. UpLift Solutions believes full service supermarkets in underprivileged communities can become the anchor to fulfill many community needs and ensure consistent access to fresh, affordable food while creating and maintaining local jobs. UpLift Solutions implements its programs across the country by creating entrepreneurial strategies that empower communities while benefiting all stakeholders involved. In order to build a sustainable supermarket development model, UpLift endorses three bottom lines: Business Profitability Community Wellness Environmental Sustainability Current Organizational Profile: Founded: 2008 Type of CDFI: Non-Depository Loan Fund Target Market: Grocery stores in underserved communities Types of Lending: Small Business Loan Products: Predevelopment, Term, Mortgage, and Community Facilities Loans Asset Size: $790,463 (FYE 2013) No. of Employees: ~15 Website: upliftsolutions.org

10 Situation: UpLift Solutions has a strong history of in-depth development services to grocery stores seeking to serve customers in food desert areas. It is interested in strengthening its relationship with developers and grocery store owners by providing lending to complement its existing development services. UpLift recognizes the need and demand for grocery store financing in underserved communities and establishes a strong loan pipeline from its development services work. By providing capital, UpLift will better position itself to become a U.S. Department of Treasury certified CDFI and have a greater impact in its community by coupling development services with unique financial products, tailored to the needs of grocery businesses. UpLift s senior management team realized that before it could scale up the capacity of its financial services department and introduce new lending programs, it needed strong credit and lending policies and procedures in place. To date, UpLift has no loan policies or procedures. You have been hired as a consultant to help assist UpLift Solutions in developing its loan policies and procedures. Discussion Questions: 1. What initial process and steps do you propose to design and implement an appropriate loan policy for UpLift Solutions? 2. What factors should you consider in underwriting a loan in the grocery store industry? What information would you need to review and understand? 3. What elements, parameters, and requirements should UpLift include in a loan policy? 4. How would a loan policy affect different UpLift stakeholders? Funders and investors? Potential borrowers? What specific aspects of the loan policy are relevant to them? 5. As a mission-driven lender, what social impact criteria should UpLift consider in its lending?

11 Answer Key Discussion Topics Question #1: Actual Process Implemented by UpLift Solutions UpLift hired a consultant and received technical assistance and training on the important attributes of an effective lending program. UpLift and its loan policy consultant spoke with people involved in grocery store lending to understand industry specific risks, opportunities, and impact. The consultant interviewed UpLift senior staff (CFO; lending manager) to understand the proposed loan program goals, UpLift s risk parameters, and their proposed lending products. UpLift reviewed loan policies drafted by the consultant to ensure the loan policies align with its mission, UpLift s risk parameters, and the needs of its community. Question #2: Factors to Consider in Underwriting to the Food Industry Any strong loan underwriting process reviews and analyzes the five Cs of credit: character, collateral, capacity, capital, and conditions. Character o Grocery store operator and/or owner, developer (if construction) Collateral o Assets that the borrower can pledge as security for the loan Capacity o Borrower s corporate and owner s personal credit record and their ability to repay the loan (financial budget, financial analysis, and financial projections) o Business plan review and analysis o Consider loan-to-value, debt-service coverage ratios, and other financial performance ratios Capital o Any capital/equity the borrower intends to inject in the project to serve as financial cushion o Any existing or additional financing to support the project that can be subordinated to UpLift s proposed loan Conditions o Interest rate, terms and conditions of loan that are acceptable for both the borrower and CDFI o Industry and local market analysis o Site visit to assess grocery store layout, presentation, cleanliness, and availability of products

12 Question #3: Parameters in Loan Policy / Main Elements of Loan Policy General Loan Requirements Fit with Mission o How to ensure it caters to low-income communities o How can UpLift meet its mission with its proposed loan products offered Underwriting criteria and process Community demographic information / Outcomes Loan Approval Process / Authority Who approves loans? Is there a loan committee or lending staff loan approval process? What types and loan amounts go to Board of Directors for approval? How and when can loan policy exceptions be approved? By whom? Potential Concentration Limits Maximum loan size Maximum loans to a borrower Maximum for a particular type of loan Loan Reporting and Credit Files Adequate and timely collection of financial information to assess borrower status Regular loan monitoring and performance review of loan health and status Regular in-person borrower visits Risk Rating System and Loan Loss Reserves Numerical risk rating system that relates to loan loss reserves Determine a loan loss reserve requirement for each loan or group of loans Process and Reporting for Problem or Past Due Loans Implementation of special review and monitoring process for loans with past due payments or loans experiencing financial difficulties Question #4: Impact of Loan Policy on Different UpLift Stakeholders Funders/Investors Investors that make loans to UpLift need to know that their loans are safe and will be repaid on time. UpLift must have procedures in place to evaluate, monitor, and mitigate the risks of its lending programs. Investors/Funders want to understand the impact of UpLift s loans to its borrowers and communities served, as well as how UpLift ensures its lending meets its mission.

13 Potential Borrowers Potential borrowers want to make sure that the terms and conditions of UpLift s loans will work for them, and the borrowing process is timely and reasonable. They may consider the following factors o Terms and interest rate of loans o Maximum loan amount o Flexibility of underwriting criteria o Underwriting process o Borrower reporting requirements o Collateral pledge requirements Question #5: Social Impact Criteria to Consider Job creation (full-time equivalents) Quality of jobs created (benefits, overtime pay, etc.) Fresh food accessibility Fresh food access in severely distressed areas Environmental sustainability of operations

14 Resources Browse the resources below and find even more at ofn.org CDFI Locator: Find a CDFI near you and get in touch with today s leading CDFIs: ofn.org/cdfi-locator OFN Internships: Learn about the exciting opportunities offered through OFN s Intern Program: ofn.org/internships Industry Job Bank: Learn about different careers in the opportunity finance industry: ofn.org/job-bank CDFI Connect: Receive trending CDFI news and updates, directly on your Smartphone: cdficonnect.org/ Social Media: Follow us on the sites below and stay up-to-date on OFN-related news: Our Twitter handles