Effort seeks to connect Evansville development opportunities with funding resources
Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe Now
The Evansville region is on its way to becoming a member of CDFI Friendly America, a not-for-profit organization that aims to help bridge the gap between community development financial institutions and potential borrowers.
Community development financial institutions—or CDFIs—specialize in providing loans to people and communities that are historically under-resourced and under-valued.
They use money from the U.S. Treasury Department’s Community Development Financial Institutions Fund, which was established in 1994. The agency funnels federal funding for community development through specially designated organizations—the CDFIs—which can be credit unions, community organizations and even venture capital funds. There are roughly 1,000 participating funding institutions nationwide of various sizes and scope.
But community organizations and local officials sometimes lack the expertise to access that money. Philadelphia-based CDFI Friendly America is trying to help by establishing partnerships in communities throughout the country.
“CDFI Friendly America is on a mission to connect the CDFI industry, which is about a $300 billion industry, to communities in this country that would benefit from their financing but don’t have access to it,” CFA founding partner Mark Pinsky told Inside INdiana Business.
Pinsky said Evansville is about halfway through the four phases of the CDFI Friendly process. Organizers held a kickoff meeting in May; the next meeting is scheduled for September. If all goes well, CDFI Friendly Evansville Region should be in operation by the end of the year.
Raising CDFI awareness
The idea for CDFI Friendly America began in 2010 following the Great Recession. Thousands of communities needed CDFI financing, but the institutions needed help reaching potential borrowers.
“If you’re used to living within the realm of opportunity that’s represented by bank lending, that’s great if you qualify. But there are a lot of people who don’t,” Pinsky said. “What if there was this other form of financing available that’s friendly and adapted to each community?”
Pinsky worked with officials to create the CDFI Friendly America process and make Bloomington the first CDFI Friendly community in 2018. South Bend, Fort Worth and Tulsa are also CDFI Friendly communities with Evansville, Las Vegas and Jacksonville in the works.
“Each of these friendly organizations, we have a lot in common, but we’re really catered to our community-specific needs,” Jane Kupersmith, executive director of CDFI Friendly Bloomington, told Inside INdiana Business.
CDFI Friendly America wants to bring an organization to every community with unmet financing needs. While banks have regulators and rules they must follow, CDFIs can be more flexible and affordable in many instances.
“In 20 years or so, there could be 30 or 50 or 75 CDFI Friendly communities. And someday, there could be hundreds, maybe thousands,” Pinsky said.
Success in Bloomington
Bloomington Mayor John Hamilton had experience in the CDFI industry and knew how powerful and effective these institutions could be. After becoming mayor, he worked with local partners to determine whether to start a CDFI in Bloomington.
“We got some really smart, good advisors in a room and invented and developed this concept. Instead of building your own CDFI, how about becoming a community that attracts and brings in existing CDFIs?” Hamilton said.
“We liked the model where we didn’t have to invent a new thing. We took advantage of partners that are out there. They wanted new markets; we wanted new partners. And it’s been working very well,” he said.
The not-for-profit now covers a much larger area than the city. Kupersmith said CDFI Friendly Bloomington supports 13 counties that have statistically been underinvested in by CDFIs. She said the organization provides a more robust ecosystem for the region.
“We have not just one nonprofit working to attract CDFIs, but all of those new CDFI partners and friends are becoming familiar with our ecosystem, and they’re able to engage with potential projects and potential borrowers. And those projects are better supported and are more likely to find appropriate financing,” Kupersmith said.
The organization said participating communities have seen a huge increase in the CDFI financing since becoming CDFI Friendly communities.
- Bloomington has had $23 million in CDFI loans, 27 times more than the amount of CDFI lending average over the past 15 years.
- South Bend has had more than $1.5 million, six times more than than the average over 15 years.
- Fort Worth had $11 million in CDFI lending its first year, four times more than the previous 15-year average.
Hamilton told Inside INdiana Business that CDFI financing has helped Bloomington advance small businesses, build housing units and work on community facilities.
“Every community in America is facing serious challenges in areas that CDFIs and particularly CDFI Friendly communities can address directly. These are deep needs, they’re long-standing and they’re complicated,” he said.
The CDFI Friendly process
The effort to make the Evansville area CDFI Friendly began long before the four-stage process was set in motion.
“The idea started a couple of years ago when one of our current city council members, one of our leading faith leaders in the community, and one of the now-retired executives from Old National Bank went up to Bloomington to see what was happening there,” Evansville Mayor Lloyd Winnecke told Inside INdiana Business.
Then began the four stages.
Assess and outreach: The first stage officially got underway in early 2023 when the CDFI Friendly America team researched the feasibility of a successful implementation in Evansville.
“There are CDFIs out there that do just about every kind of imaginable financing. But they don’t know what’s possible in Evansville, and the people in Evansville don’t know what’s possible with them. We can help make those introductions and provide support,” said Pinsky.
Organize and educate: For the second stage in May, more than 150 people including CDFIs, prospective borrowers and bankers attended a kickoff meeting at the University of Evansville and started working on a pipeline of potential deals. Pinsky, Kupersmith and Hamilton attended the meeting.
“It was wonderful to see they had a large group and a diverse group, whether you’re talking racial diversity or socioeconomic diversity,” Kupersmith said. “There was a wide range of community members represented at this event.”
“Several folks on the advisory board said it’s the most diverse meeting they’ve ever seen in Evansville,” added Pinsky.
Hamilton encouraged the crowd to continue efforts to bring in CDFIs by telling Bloomington’s story. “The energy in the room was terrific. I just tried to spur it on and keep it moving forward,” he said.
Plan: The third stage will involve another meeting in Evansville on Sept. 27. The gathering will include a progress report, one-on-one networking between CDFIs and potential borrowers and roundtable discussions about what makes a CDFI loan application successful.
“The goal is to take apart the deal and say, ‘Why wouldn’t a bank do this? And could a bank do this? And what would it take for a bank to do this?’” Pinsky said. “Because if we see a deal and we can make it work for a bank, we make it work for a bank. That’s always first priority because they have more money than we do. And if not, what’s it going to take for a CDFI to do the lending?”
Implement: Once the final stage is complete, CDFI Friendly Evansville Region will be fully operational. The goal is to get a board of directors, an executive director and staff in place by the end of the year.
“It’s important that this organization be both community-centered but also community led and controlled. [CDFIs] want to know this is something the community wants and the community voice is heard,” said Pinsky.
Progress in Evansville
From assessment to education, CDFI Friendly organizers have discovered a definitive need for CDFI financing in Evansville and its surrounding communities. They’ve also reaffirmed the lack of CDFI awareness in the region.
“What we learned is the knowledge of how a CDFI works is not all that deep. It’s pretty uneven, actually. Some people think it’s a total replacement for banks, but it’s not,” Winnecke said.
“You may have an entrepreneur who has a great idea, but maybe they don’t fit the risk profile of a typical lender. Maybe a portion of their project does, or maybe none of it does, but that’s where a CDFI can come in,” he added.
Several projects stemmed from the first meeting, including more than 20 inquiries and more than $2 million in potential deals.
“Most of them are small businesses, which is what we expected to see,” Pinsky said. “We feel like the inquiries are generally of high quality. They match well with CDFIs.”
“Already, we’re seeing the potential and some fruit of our early labor,” added Winnecke. He credits CDFI Friendly America for keeping the ball rolling. “Mark and the team have done outstanding work helping us create realistic expectations. They’ve done a phenomenal job of keeping us organized and focused on the task at hand.”
A CDFI borrower’s experience
Tyrell Ferguson, a CDFI borrower, spoke to the crowd at the Evansville meeting. He’d been working at a local barber shop when he decided to branch out independently.
“When I began taking the steps to start my business, I was going to do it the old-fashioned way. Save money and see what I could afford,” Ferguson said.
The barber learned about CDFIs when he started looking into other financing options.
“I applied. I got approved. It might have taken about 30 days to get everything finalized, and I got started from there. It was pretty simple,” he said.
Ferguson told Inside INdiana business CDFI financing enabled him to set up a better environment for his business, Higher Image Hair Studio, on Covert Avenue.
“I just wanted to give my clients a place to come to show them how much I appreciate them even coming to me in the first place to pick me as their barber. [CDFI financing] allowed me to put my dream together exactly as I pictured it versus me throwing it together with the money I had,” he said.
Small businesses may benefit from CDFI financing, but the project scope extends beyond Main Street.
“I think about [CDFIs] as equity engines or partners to help achieve difficult public purposes: affordable housing, community facilities like day cares or health care facilities as well as under-supported small businesses,” said Hamilton.
Affordable housing is one of the main focuses for CDFI projects in Bloomington and Evansville.
“If you talk to anybody working in economic development, we’re all really focused on housing because we just know that isn’t only a challenge that’s hurting a lot of families, but it’s also a barrier to our growth and future prosperity,” Kupersmith said.
Winnecke agreed. “We have a 1,500 to 1,800 deficit of affordable housing units in our community. You don’t build those overnight, and you don’t do them without a lot of collaboration. This is one area where we are confident that we could make some hay with as a region.”
Pinsky said CDFI Friendly communities help open the door to unfamiliar resources that allow people to see what’s possible and give worthy projects a chance.
“For a lot of the communities we’ve worked in over the last several years and for the [Evansville area] communities we’ll work in, they’re not used to people showing a belief in their future. When someone comes in [with that belief] and is willing to back it up with money, [these communities] get taken seriously, and it makes a difference in people’s lives,” he said.
“A lack of capital shouldn’t be the reason a person isn’t able to achieve their dreams,” added Ferguson.