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CDFIs
pursue their goals of building wealth and strengthening communities
by providing several kinds of assistance:
Loans
Venture capital investments
Technical assistance
Basic financial services
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Loans
Almost all CDFIs make loans. Just like loans from commercial banks,
CDFI loans must be repaid with interest. Every CDFI has its own
goals and its own strategy for accomplishing these goals. These
strategies are reflected in the different types of loans each
institution makes.
More on loans
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Venture
capital investments
The only type of financing done by CDFIs that isn't lending is
venture capital investment. In this type of deal, the CDFI essentially
buys a partial ownership share of a business. The borrowing company
makes no payments and the investment appears as increased equity
on the company's books.
More on venture capital
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Technical
assistance
Because CDFI borrowers usually have very little business or borrowing
experience, they often encounter financial problems. Rather than
take a "sink or swim" attitude, CDFIs offer technical assistance,
advice and training that can help borrowers succeed.
More on technical assistance
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Basic
financial services
CDFIs can help communities even without financing new businesses,
housing, or facilities. In many areas, just providing basic financial
services such as savings accounts, check cashing, and small consumer
loans can rescue poor people from the clutches of loan sharks, check-cashing
shops, and other predatory lenders.
More on basic financial services |
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