CDFI’s and High-Cost Alternative Lenders

“Must Read” Reports on CDFIs & High-Cost Alternative Lenders

High-Cost alternative lenders: the bane of our contention. Yesterday, the U.S. Treasury released a seminal white paper on online marketplace lending called “Opportunities and Challenges in Online Marketplace Lending.” It was published after Treasury reviewed public comments on the issue, and conferred with seven relevant federal agencies. Treasury’s top recommendation to the federal government and private sector is that they “support more robust small business borrower protections and effective oversight.”

High-Cost Alternative LendersRelated to this is a study just released by Opportunity Fund, a leading CDFI in California, that is a first-of-its-kind analysis of the loans being offered to small businesses by short-term, high-cost alternative lenders.  “Unaffordable and Unsustainable: The New Business Lending.”  One of their findings was that among the businesses that Opportunity Fund was able to refinance, monthly payments fell by more than 60% and APR dropped by an average of 85%. Those savings represent critically needed cash flow for many small businesses, but especially those struggling to survive or expand.”

Kudos to Opportunity Fund for investment in using their data sets to illustrate a problem – and a solution!

Impact Not Overhead!

bridgespanMany of our clients work with funders that focus more on overhead not impact. Sound familiar?

I think this graphic from the Bridgespan Group hits the nail on the head. How do you frame this issue with your stakeholders?  How do you define mission-driven success?  What does long-term change and impact  look like for your clients?  The less these questions are answered, the more some funders will resort to focusing on overhead. What do you think?