A Community Development Financial Institution (CDFI) loan is a type of financing offered by mission-driven lenders that focus on supporting underserved communities An underserved community refers to populations and geographic areas that face limited access to traditional financial services due to economic, social, or geographic barriers. This includes low-income neighborhoods, rural communities, minority-owned businesses, and entrepreneurs with limited credit history or collateral. and small businesses. These loans provide flexible terms, lower interest rates, and easier qualification requirements than traditional bank loans.
A CDFI loan is designed for small businesses and entrepreneurs who need funding but might not check all the usual banking boxes. These lenders can be banks, credit unions, or nonprofit organizations that provide this type of financing. They focus on helping businesses grow and often provide additional resources like business training and financial counseling. If you’ve struggled to secure funding elsewhere, a CDFI loan could be the game-changer your business needs.
How do CDFI loans work?
CDFI loans are like a secret weapon for small businesses that need funding but don’t fit the rigid mold of traditional lenders. Instead of fixating on perfect credit scores or big cash reserves, CDFIs focus on your business’s potential and the impact you’re making in your community.
Plus, they don’t just hand over the money and disappear — they often provide mentorship, financial training, and other resources to help your business thrive long after you get the loan. While CDFIs offer more flexible terms and support services, they may have geographic limitations and potentially smaller loan amounts compared to traditional banks.
How CDFI loans help communities
These loans help small businesses open their doors, expand, and create local jobs — whether it’s a new coffee shop on Main Street, a daycare in a growing neighborhood, or a family-run auto repair shop finally getting new equipment.
Because CDFIs focus on underserved areas, these loans don’t just boost individual businesses — they fuel economic growth, revitalize neighborhoods, and give more people access to essential goods and services. It’s not just about money — it’s about building stronger, thriving communities, one loan at a time.
Here are a few immediate improvements communities see with CDFI loans:
- Helps families buy their first home: CDFI loans make homeownership a reality for families who might not qualify for traditional mortgages, turning dreams of white picket fences into real addresses.
- Supports small businesses: From mom-and-pop shops to future industry leaders, CDFI loans give small businesses the funding they need to grow, create jobs, and keep local economies thriving.
- Invests in local schools, healthcare centers, and community centers: These loans don’t just fund businesses — they help build better schools, healthcare facilities, and community spaces, making neighborhoods stronger and more connected.
- Provides mentoring and financial advice: Beyond just writing checks, CDFIs guide borrowers with mentorship and financial education, ensuring long-term success instead of just short-term funding.
Which communities qualify for CDFI financial assistance?
The CDFI Fund has a mapping tool so you can search the geographic location of your business to determine if you’re in a qualified lending area. You can simply put your address in the search field and check the color of the map. Investment Area (IA) qualified tracks will appear in green, and regular census tracts will appear in white.
Click the map below to visit the CDFI Public Viewer Map to see if your business address is in the IA lending area.
Image source: U.S. Department of the Treasury Community Development Financial Institutions Fund website
Pros and cons of CDFI loans
| PROS | CONS |
|---|---|
| More flexible eligibility requirements than traditional lenders, especially for those with limited credit history or lower credit scores | Geographic limitations — business must typically be in or serve a designated low-income or underserved area |
| Mission-driven approach focused on community development rather than just profit | Potentially smaller loan amounts compared to traditional bank loans |
| Technical assistance and business support are often provided alongside financing | Application process can be thorough and may require detailed documentation of community impact |
| Competitive interest rates that are often lower than alternative lenders | May require more reporting on how funds are used and their community impact |
| Variety of loan products tailored to different business needs (working capital, equipment, real estate) | Funding availability can be limited as CDFIs have finite capital resources |
| Repayment terms with longer and more flexible payout structures | May still require collateral depending on the specific CDFI and loan type |
| Relationship-based lending that considers character and community impact, not just financial metrics | Less widely available than traditional bank loans in some regions |
| Specialized knowledge of underserved markets and industries | Processing time may be longer due to a more comprehensive evaluation process |
| Additional funding opportunities through referrals to other mission-aligned programs | May have specific use restrictions to ensure community benefit |
Who can get a CDFI loan?
A wide range of businesses can qualify for CDFI loans. These institutions specifically aim to support enterprises that may struggle to access traditional financing. Here are the types of businesses typically eligible:
- Small businesses, especially startups and early-stage companies
- Minority-owned businesses
- Women-owned businesses
- Veteran-owned businesses
- Nonprofit organizations with revenue-generating activities
- Social enterprises focused on community benefits
- Affordable housing developers
- Healthcare providers serving underserved communities
- Childcare centers
- Grocery stores or food-related businesses in an IA area
- Manufacturing businesses that create local jobs
- Service businesses in underserved areas
- Arts and cultural organizations
- Green businesses and sustainable energy projects
- Agricultural businesses and rural enterprises
The key factor is that the business should demonstrate positive community impact — such as creating jobs, providing needed services, or contributing to local economic development in underserved areas.
Each CDFI has its own focus areas and priorities, so some may specialize in certain industries or business types. It’s worth researching CDFIs in your region to find those that align with your business model and needs.
Eligibility requirements for a CDFI loan
To qualify for a CDFI loan, you’ll typically need to meet these eligibility and CDFI loan requirements:
1. Location: Your business or project must be located in or primarily serve a CDFI investment area, which includes low-income communities, distressed areas, or underserved populations.
2. Business criteria:
- Your business must demonstrate financial need
- You must have a viable business plan
- The loan must create a positive community impact like job creation or providing essential services
3. Credit requirements:
- While CDFIs are more flexible than traditional banks, they still review credit history
- Many CDFIs work with borrowers who have limited credit history or lower credit scores
4. Documentation typically needed:
- Business plan
- Financial statements
- Cash flow projections
- Collateral information (if applicable)
- Personal financial information
- Personal tax returns
- Business tax returns
- Income statements
- Balance sheets
Different CDFIs may have specific additional requirements based on their mission, focus area, and funding sources. I’d recommend contacting CDFIs in your area directly to learn about their specific eligibility criteria and application process.
How to apply for a small-business CDFI loan
Step 1: Research and identify CDFIs in your area
- Use the CDFI Fund’s search tool to determine geographical eligibility
- Check with your local Small Business Development Center (SBDC)
- Search for industry-specific CDFIs that might focus on your business type
- Contact your local chamber of commerce for recommendations
Step 2: Determine your funding needs
- Calculate exactly how much funding you need
- Document specifically how the loan will be used
- Prepare a timeline for fund deployment
- Outline expected return on investment or community impact
Step 3: Establish your community impact
- Document how your business serves or will serve the local community
- Quantify job creation potential
- Outline environmental benefits (if applicable)
- Describe how your business addresses community needs
Step 4: Schedule initial consultation
- Contact your chosen CDFIs for preliminary discussions
- Inquire about their specific application process and requirements
- Discuss available loan products and terms
- Ask about technical assistance and support services
Step 5: Complete the application
- Fill out the formal loan application
- Submit all required documentation
- Include your business and personal credit information
- Provide collateral information if applicable
Step 6: Attend the interview and site visit
- Prepare to discuss your business in detail
- Be ready to answer questions about your financial needs and plans
- Give a tour of your business location if requested
- Demonstrate community connections and impact
Step 7: Follow up
- Respond promptly to any requests for additional information
- Stay in regular contact with your loan officer
- Provide updates on any significant business changes
- Inquire about application status if you haven’t heard back in two to three weeks
Step 8: Loan approval and closing
- Review and negotiate final loan terms if needed
- Complete any required pre-closing requirements
- Sign loan documents
- Set up a repayment schedule
Step 9: Post-loan relationship
- Adhere to reporting requirements
- Take advantage of any offered technical assistance
- Maintain communication with your CDFI
- Consider how to document your community impact for future funding needs
Where to find a small-business CDFI loan
The first way I would recommend to find a CDFI lender is to partner with a fintech company like Lendio Lendio is a fintech and not a bank specializing in connecting loan applicants with lenders for business financing. . It serves as a marketplace partnering with over 75 lenders. Many of these lenders offer CDFI funding options. This platform streamlines the loan application process, allowing business owners to compare loan options from multiple lenders with just one application.
The second method of finding a lender is to search using a list of known participants that provide CDFI lending options. Here are the main categories and some notable examples:
- Opportunity Finance Network members
- Capital Impact Partners
- Clearinghouse CDFI
- Community Reinvestment Fund (CRF)
- Accion Opportunity Fund
- Local Initiatives Support Corporation (LISC)
- Chicago Community Loan Fund
- Detroit Development Fund
- Coastal Enterprises Inc. (CEI) – Northeast
- Southern Bancorp – Southern states
- Virginia Community Capital
- Pacific Community Ventures – West Coast
- 1st Choice Credit Union
- CORE Credit Union
- Self-Help Credit Union
- Hope Credit Union
- Inclusiv (network of credit union CDFIs)
- Latino Community Credit Union
- Craft3 (Pacific Northwest)
- LiftFund (Southern states)
- Community First Fund (Mid-Atlantic)
- Colorado Enterprise Fund
- Liberty Bank
- Carver State Bank
- Citizens Trust Bank
- Sunrise Banks
- Carver Federal Savings Bank
- Industrial Bank
- Southern Bancorp Bank
- Native American Bank
To find CDFIs in your specific area, you can use:
- The CDFI Fund’s searchable database at cdfifund.gov
- The Opportunity Finance Network’s CDFI locator
- Your local Small Business Administration (SBA) office
- Community development corporations in your area
Each CDFI has different focus areas, loan products, and geographic coverage, so it’s worth researching several to find the best fit for your business needs.
How are CDFIs funded?
CDFI funding comes from a diverse mix of public and private sources that enable these institutions to serve financially underserved communities. Primary funding streams include federal support through the CDFI Fund at the U.S. Treasury Department, which provides grants, investments, and technical assistance.
CDFIs also attract investments from traditional banks seeking to fulfill Community Reinvestment Act (CRA) requirements, as well as from philanthropic foundations, corporations, religious organizations, and individual impact investors. Many CDFIs utilize creative financing strategies like New Markets Tax Credits and leverage partnerships with traditional financial institutions to expand their capital base. Other investments may come from the U.S. Department of the Treasury and The Department of Commerce.
Some CDFIs also generate revenue through interest and fees on their loans, though they typically maintain below-market rates to fulfill their mission of accessible financing. This diverse funding ecosystem allows CDFIs to take measured risks on promising but overlooked businesses and projects that conventional lenders might decline, creating economic opportunity in low-income and marginalized communities across America.
CDFI loans vs traditional bank loans
Feature | CDFI loans | Traditional bank loans |
|---|---|---|
Target audience | Underserved communities, minority-owned, low-income businessesa | Broader range of businesses with stronger financial profiles |
Eligibility requirements | Flexible, with focus on community impact, lower credit scores | Higher credit score, established financial history, collateral |
Loan terms | More favorable for small businesses, slightly higher interest rates | Competitive interest rates, stricter terms |
Approval process | More flexible, with additional support and guidance | Rigid, focused on credit score and financial metrics |
Loan amounts | Smaller loan amounts, aimed at startups or small businesses | Larger loan amounts for established businesses |
Interest rates | Higher than traditional banks, but lower than alternative lenders | Generally lower, based on creditworthiness |
Funding speed | Slower due to extra support and assessment | Faster, especially with online options |
Additional support | Provides technical assistance, education, and mentorship | Minimal post-loan support, mainly customer service |
CDFI loan alternatives
If you’re looking for alternatives to CDFI loans, here are several options to consider:
- SBA loans: The Small Business Administration offers several loan programs with competitive rates and terms, including the popular 7(a) program, microloans, and 504 loans for real estate and equipment. These are some of the best small business loans available today, and most traditional banks participate in the SBA lending program.
- Microlenders: Organizations like Kiva, Grameen America, and local microloan programs offer small loans (typically under $50,000) with accessible requirements.
- Community banks and credit unions: These local financial institutions often have more flexible lending criteria than large national banks and may offer specialized programs for small businesses. If you need more information about how to get a small business loan, it’s best to contact a potential lender and find out the steps, requirements, and options available.
- Economic Development Corporations (EDCs): Many cities and counties have EDCs that provide loans and grants to businesses that contribute to local economic growth.
- State-specific loan programs: Many states offer specialized loan programs for small businesses, particularly those in rural areas or owned by minorities, women, or veterans.
- Crowdfunding: Platforms like Kickstarter, Indiegogo, and GoFundMe allow you to raise capital from many small investors.
- Grants: Various federal, state, and private organizations offer business grants that don’t require repayment, though competition is typically high.
- Angel investors and venture capital: For high-growth startups, equity investment might be appropriate, though it requires giving up some ownership.
- Peer-to-peer lending: Platforms like Funding Circle connect businesses directly with individual lenders.
- Supplier financing or trade credit: Arrangements with your suppliers that allow you to delay payment for goods or services.
Each alternative has its own eligibility requirements, advantages, and limitations. The best option depends on your specific business needs, growth stage, and financial situation. If you’re searching for an option that offers a quick application process and streamlined procedures, check out our roundup of the best easy business loans. You may find an alternative that’s the perfect fit for your business mode.
FAQs
CDFI loans are designed for small businesses and organizations in underserved communities, particularly those owned by minorities, women, and veterans who demonstrate positive community impact but may struggle to secure traditional financing due to limited credit history, collateral, or location challenges.
Getting a CDFI loan is typically easier than obtaining traditional bank financing, with more flexible credit and collateral requirements, though you’ll still need to demonstrate a viable business plan and community impact to qualify for approval.
CDFIs primarily lend to small businesses, nonprofits, and entrepreneurs in low-income or underserved communities, with a special focus on minority-owned, women-owned, and veteran-owned businesses that may struggle to access traditional financing but demonstrate positive community impact.
Most CDFIs don’t have strict minimum credit score requirements, evaluating applications holistically instead, with scores as low as 580 to 620 sometimes accepted — though a score above 650 strengthens your application considerably.
