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May 7, 2010

Alternate Sources of Funding Emerge from Economic Instability

As many small business owners and entrepreneurs can tell you, getting loans from big banks and large financial institutions is harder than ever. With so many bad debts, mismanaged books and overleveraged investments, big banks and other large financial institutions are either unwilling or unable to make the same kind of investments that they were just two years ago. Gone are the days where big banks would loan money to anyone with a business plan. Now, small business owners and entrepreneurs, no matter how well established or well positioned, are being turned away. However, when one door closes, another opens. All small business owners and entrepreneurs should become aware of Community Development Financial Institutions, or CDFIs.

If, like many other business owners, you are struggling to find fresh capital CDFIs may be just what you are looking for. Smaller institutions within the U.S. that focus largely on communal and economic development, such as nonprofit organizations and small and local banks, can qualify to receive the CDFI designation from the U.S. Treasury. Upon receiving the designation, these smaller institutions receive expanded access to capital, financial services and credit. In turn, these institutions then have the capacity to expand their provisions of financial support to the small business owner and entrepreneur.

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The Riegle Community Development and Regulatory Improvement Act of 1994 established the CDFI designation along with making the financial resources available to those institutions, in the form of the CDFI Fund. As the big banks close their doors, these smaller institutions open theirs. In 2008, 41 institutions gained the CDFI designation; with greater demand, in 2009, that figured grew to 55 institutions. There are currently 859 CDFI designated institutions in the U.S.

Although these institutions are a good alternative from big banks and other financial institutions, for those small business owners and entrepreneurs seeking investments, there are a few, yet not insurmountable, drawbacks. In order to receive financial assistance, whether it is in the form of investment capital or tax credits, companies must be willing to sit down with a CDFI institution and spend some time going through a bit of bureaucratic paperwork. A number of variables are considered when reviewing an application for funding, including a willingness to make business adjustments, a plan to positively affect the local community and the capacity to repay loans.

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Getting investment capital from CDFIs today requires more effort than getting investment capital from a major financial institution did two years ago; but, the effort is hardly impossible. According to the CDFI Fund, since its inception, the fund has awarded over $1.1 billion to various CDFIs. For 2010 alone, the operating budget of the CDFI Fund increased to more than $240 million.

As financial resources remain tight around the country, it is always important to be aware of new opportunities for capital investments. CDFIs and the CDFI Fund are just a few of a growing list of options available to small business owners and entrepreneurs seeking funding. Additionally, individuals and companies seeking venture capital, investment opportunities and other financial resources should take advantage of VCgate’s Venture Capital and Investors Database; where one can get easy access to thousands of venture capitalists, angel investors and venture capital firms. Within the database, those seeking capital can get easy access to 594 investors within the manufacturing industry, 339 investors within the electronics industry and 686 investors within the business services industry. If you seek venture capital, do not let this, or any other opportunity, pass you by. Try VCgate’s Venture Capital and Investors Database today and get the funding you have been waiting for now!




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