CDFIs can take several institutional forms. Each offers advantages and limitations.
Loan funds can be flexible lenders because they are free from many government regulations.
Credit unions are member-owned financial institutions that are chartered, insured, and regulated by government agencies.
Community development banks provide all the services, security, and regulations of commercial banks, but have a community development mission.
Venture capital funds provide businesses with financing in return for an ownership stake in the company.
Microloan funds provide financing to very small businesses.

Loan funds
Loan funds are able to be creative and aggressive in lending to unbankable customers because they are not subject to the same regulations as banks and credit unions. Although they don't offer investors insured-deposit accounts, many of them have established excellent records of repayment.

To find a loan fund in your area, or to learn about loan funds that are doing work you'd like to support, contact the National Community Capital Association.

Credit unions
Credit unions are cooperative financial institutions that take deposits and make loans only to their members. Members of a credit union must all be part of a defined group, such as employees of a particular company, or residents of a particular town. Among the hundreds of credit unions throughout the United States, Community Development Credit Unions are a self-defined group of institutions dedicated to serving needy communities.

To find a community development credit union in your area, or to find a credit union designated as low income that does work you find interesting, contact the National Federation of Community Development Credit Unions.

Community development banks
The goals that guide the lending decisions of community development banks are what make them different from commercial banks. Rather than working to maximize profits for their stockholders, community development banks focus on helping the communities they serve.

The same well-established government rules and regulations govern both commercial banks and community development banks. This means individuals can invest in a community development bank by buying a certificate of deposit or opening a savings account, just as they would in a commercial bank. These same government regulations, however, can limit the flexibility of community development banks.

There are only a few community development banks in the United States. The largest is South Shore Bank in Chicago, with subsidiaries in Oregon and Washington. Community Capital Bank operates in Brooklyn, New York; Community Bank of the Bay is located in Oakland, California; Southern Development Bankcorp serves rural Arkansas.




Venture capital funds
Community development venture capital funds typically make equity investments in small businesses that hold the promise of rapid growth. The financing is structured so that if the business does well the venture fund will share in the upside. They apply the same powerful engine of economic growth that has driven the expansion of Silicon Valley and other hotbeds of business development to create good jobs, entrepreneurial capacity and wealth in communities that the current prosperity has passed by.

For more information, contact the Community Development Venture Capital Alliance.

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Microloan funds
Microloan funds operate in much the same way as traditional loan funds. The difference is that they focus on very small loans, made to very small businesses——or micro-enterprises——often sole proprietorships or family businesses. The most common type of microloan lending is done on an individual basis, using creative forms of collateral. Some microloan funds have also adapted lending strategies, such as group lending, that are used in developing countries. Group lending, devised by the Grameen Bank in Bangladesh, is a lending strategy in which small groups of borrowers co-guarantee each other's loans.

For more information visit web site of the Association for Enterprise Opportunity.