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mike

By CNote

Gender inequality is entrenched. Here are four things You can do about it.

Throughout my career in financial services, I was frequently the only woman in the room. I know all too well how it feels to be talked over, ignored, or simply excluded. I also know how different it can be – I feel lucky to have allies and mentors who made it clear that the bad experience is “on them” and definitely not because something is wrong with me. Read More

By Financial Planning

Where Can I Get Financial Advice?

Financial advice: Is it only for the 1%?

While the topic often invokes images of offshore tax havens and the management of large family estates, it is an outdated misconception that only those with a significant stockpile of cash can get access to top-tier financial advice. Read More

By Borrower Stories

Marilyn Yu of Shared SF | Building a Space For Inspiration & Community

SHARED SF is founded on the apparent contradiction that 1 + 1 = 3. But as you’ll see, the math adds up.

Doing more together

What doesn’t fly in mathematics, can be irrefutable in the currency of community: When people work together, they can accomplish more than the sum of their parts.

And synergy is what SHARED SF is all about. “SHARED is a shared workspace for creative people. So that’s anyone who builds, designs or invents something,” explained founder Marilyn Yu. “It is based in the belief that together we can create greater things than we could individually or in isolation,” she states.

A space for entrepreneurs and creators

Indeed, if you take a walk around the premises, you can see how the physical layout of the place reflects that vision. From office spaces to fabrication spaces, communal tools and equipment, and lockers, SHARED provides just the right amenities to design anything from a motorcycle jacket to a website for an emerging startup.

There are larger spaces that allow people to “make a mess,” and small, quiet spaces “for work that requires a lot of thought and/or concentration.” There are also hangout spaces for members to discuss innovative ideas or just get to know one another.

Though the rooms vary in functionality, the place is decorated throughout in sleek, modern style, with black and white photos, dark wooden floors, and matted glass panel rooms. It reflects the values of creativity, innovation, and collaboration that are prevalent throughout this community space.

Nurturing Collaboration and Creativity

SHARED’s members — and there are 60 to 80 of them at any given time — are as diverse as the space that was created to support their aspirations. “We have a pretty broad range of people here,” Marilyn told us. From fine artists to genome sequencing companies and AI companies, to Marilyn herself, who designs women’s motorcycle jackets, there is no shortage of diversity in terms of craft. The common ground is that everyone is a small business, and everyone is passionate about what they do. It’s this kind of fire that is contagious amongst the members and fuels their work.

The common ground is that everyone is a small business, and everyone is passionate about what they do.

“I like being around people who are really passionate about what they’re doing,” Marilyn told us earnestly. “There aren’t people here who just come here because it’s their job. Everyone’s working on something that they feel very strongly about, and that’s really nice, to be around that kind of energy. ”

History of SHARED

“I think it’s pretty common for people to share a space with two or three other people — I mean people do that in their living situations as well,” Marilyn said when we asked how she got the idea of SHARED. Indeed, sharing space is normal and even necessary, as anyone who lives or works in an expensive city like SF will tell you.

Marilyn, working at SHARED

But when Marilyn conceived of the idea of SHARED, she was thinking about more than just saving money. Recognizing the invaluable synergy that comes from working with other creative people, she wanted to establish and maintain a reliable and affordable space for that.

Getting Support For Her Vision Wasn’t Easy

It was difficult in the beginning, though. To create the special space she envisioned, she had to have a building she could call her own. And to buy the building, Marilyn had to apply for a large loan. The application involved securing multiple positions on the loan, both from a local bank and CNote-partner, and mission-based lender, CDC Small Business Finance. “We went through a lot of hurdles for that,” Marilyn confided. “Shared workspaces, they’ve been around for a decade or two…but more risk-averse businesses like banks, like the federal government — they’re not really in on the latest business structures.” It took a lot of convincing to get the bank and SBA to believe in SHARED enough to invest in it.

“That’s where the CDC [CNote-partner CDC Small Business Finance] came in, because they were packaging the loan for the SBA,” Marilyn explained. With the help of CDC’s research alongside her own, Marilyn was able to help The SBA see the relevance of shared workspaces and to secure funding. In 2010, she purchased 739 Bryant Street; and after renovating the place for 90 days, she turned her vision into a reality.

More of a Community Than a Business

Now it’s fair to say that in the past 7 years, a unique little community has emerged out of SHARED. Unlike other shared workspaces, it has become something more than a workplace to its members. “It’s kind of like an extension of their home. They’ll leave their computer and their phones out, and they’ll go grab a bite to eat. It’s very familiar….I think maintaining a safe space for people to feel comfortable is very important,” said Marilyn when we asked her what she did to make her clients happy.

Another thing she does is hand select her members, looking for people who are both “professional, meaning that they’re serious about whatever business idea they have,” and a good fit for the existing members. Her carefulness has ensured that SHARED remains a place of synergy both professionally and personally, and it has really paid off for her and her members. “I love just seeing people meeting other people…Often, members will then collaborate and work on projects together. Or they become friends…” One member even officiated another’s wedding.

SHARED’s members are so close, that forced events like happy hours aren’t even needed. “I think people didn’t think they were very necessary…which is kind of a good thing” Marilyn mused. “They feel comfortable talking to someone outside of a structured mingling time.” Why bond in a bar when mutual passion, hard work, and a general openness and friendliness has already bonded you in the workplace?

Conclusion: 1 + 1 = 3

Just as this proposition describes what’s going on within SHARED, it describes what’s going on in the world of impact investing. Everyone has something to bring to the table. However small, it can make ripples of impact for others. Marilyn conceived an idea to create a space that will help small businesses get on their feet and thrive and the impact has been tangible and positive. CNote’s partner CDC, by offering their time, research, and innovative thinking did their share. And every small business that has gone through SHARED will, in turn, make their own impact.

You can make our own impact and help write more stories like SHARED’s by investing in CNote. Learn More.

Learn More

By Financial Planning

7 Financial Pitfalls and How They Can Negatively Impact Your Health

Does Money Matter?

People often think they can compartmentalize various parts of their life. We may think that the way we eat doesn’t impact the way we feel, or that our financial situation won’t have an impact on our health or relationships. While for some it’s possible to keep everything separate, oftentimes challenges in one area of our lives can bleed over into other areas as well. Read More

By Change Makers Series

Change Makers Interview: Lenwood V. Long Sr. of the Carolina Small Business Development Fund

October 2019 Update: Mr. Long is no longer with Carolina Small Business Development Fund (CSBDF). He was recently recognized for his financial inclusion work by The African-American Alliance CDFI CEOs.

Today we’re excited to share our interview of Lenwood V. Long Sr. He is the former CEO and President of Carolina Small Business Development Fund (CSBDF), a Community Development Financial Institution (CDFI) and statewide nonprofit organization based in North Carolina. The mission of Carolina Small Business is to foster economic development in underserved communities by providing capital, business services, and policy research to support small businesses.

Lenwood was gracious enough to share his vision for community finance and some of the challenges he sees that still must be addressed. Lenwood is an industry Change Maker who has dedicated his career to community finance and increasing financial inclusion. This interview is will give you insight into what truly motivates all the people like Lenwood, who work at CDFIs across the country and are building a more inclusive and fair economy one community investment at a time.

Well, I grew up in rural North Carolina, a little place called Bayboro, North Carolina. Proud to be a product of that rural America, and I grew up in time of segregation. I grew up at a time where I never thought a guy from Bayboro, North Carolina, would not only be a CEO of a community development financial institution. But really never imagined that I’d be in a position to help people fulfill their dreams, realize their aspirations, and be an advocate for change. And this whole movement towards decreasing the wealth gap that we see in this nation among people of color. And I’m excited to be on this mission.

Lenwood V. Long, Sr. (CSBDF)

In his role as President/CEO of CSBDF, Lenwood has led the organization through a period of transformational growth. In 2009, under his leadership, the organization went through a strategic shift and rebranding, establishing its direct small business lending program. Within five years, loan volume totaled over $30 million.

Lenwood has more than twenty-five years of experience in community economic development, human resources, and business management. He has held leadership positions in a variety of organizations, including statewide economic and community development agencies, national consulting firms, and nonprofit organizations.

Lenwood’s professional accomplishments are rivaled by his personal achievements, having served in the United States Army (Viet-Nam Combat Infantry Paratrooper) and received an Honorable Discharge as Sergeant (E-5). Lenwood has also has served as a bi-vocational Senior Pastor of New Bethel Baptist Church in Rolesville, North Carolina since 1996. In 2016, Lenwood was awarded The Order of the Long Leaf Pine. This is among the most prestigious honors awarded to North Carolinians who have made a significant impact through their exemplary service to the state and to their communities.

CNote and CSBDF recently announced a partnership where CNote will serve as a capital source for CSBDF’ as they continue to provide loans to underserved small businesses across North Carolina. The entire CNote team is extremely excited to partner with Lenwood and the Carolina Small Business Development Fund team. Now, on to the interview.

If you’d like to listen to the full audio of the interview, click play below. Additionally, you can skim the interview highlights below or the read entire transcript below the highlights.

 

Interview Highlights

About Carolina Small Business Development Fund:

Carolina Small Business Development Fund is a small business lender. Our mission statement is to provide capital business services and policy and research to support small businesses. So the focus is really upon small businesses throughout the state of North Carolina, although we do provide some lending in South Carolina. So the main focus, small business, augmented by business services with policy and research as a focal point to become a current leader as relates to small businesses, especially in North Carolina.

And the communities that CSBDF serves:

A way to look at it is we are a very diverse lender. If you look at our lending across the state of North Carolina, you’ll find that roughly 57% minorities, or people of color. I’m very pleased that over 38% of our lending is to women entrepreneurs, gratified that 18.5% of our lending goes to veterans across this state, as well as about 41% to startups. And let me sort of say that the reason startups are so high is that we are an SBA approved community advantaged lender, which is a pilot program developed by SBA to allow CDFIs to participate in the R7A program. But they renamed it because of the focus to underserved community advantage. And then about 34% are to low income. So as you can see, the lending is very diverse and has reached that underserved market that typically banks, while strong supporters, do not serve because of [1] the risk level of some of our borrowers, [2] credit issues, and [3] size of loans. Those tend to not be accessible for underserved communities and people of color.

On defining what CDFIs do, they “focus on providing capital or housing support services to underserved communities, and primarily those communities that have a high percentage of poverty, especially persistent poverty. And so the mandate coming from the CDFI fund itself is really serving the truly underserved across this nation. And we’re proud to be a part of our mission and vision, and the vision bringing greater economic opportunity for our people.”

How Carolina  Small Business works to measure the impact of its community lending activities:

We do an impact assessment analysis of our lending through our borrower survey. We even partnered with the Center for Budget and Tax here in the State of North Carolina, in the City of Raleigh, and developed a sort of matrix, a form of looking at indirect impact. We’d say that when you look at multiplying impact, it’s says that for every loan we make there’s an indirect impact in that community. And I think that’s somewhat abstract, but when you begin to look at it from a simpler model that we developed, it’s simply this; as we make loans, those borrowers hire people, so we add to the employment of those communities. Two, that the borrowers, they pay taxes so you’re adding to the revenue base of those communities. And third, those borrowers are people who buy services and goods, which helps the economic ecosystem of that community, and so as we make loans not only are we helping the borrower to move forward, we are actually helping to build the economy of local communities.

On how being so close to the community helps Carolina Small Business better evaluate risk:

I think that’s very important. You’ve raised an important point because one of the things we like to do is get to know our borrowers and our borrowers get to know us. And so it’s not that we can scale and trying to scale the loans approved or the number of borrowers. But our mission is to see those borrowers succeed. And so we want to work with them, exactly where they are and that rating would tell us based upon a number of metrics that we’ve developed to do that. How much and what level of technical system that borrowers need? Because, let’s face it, when you serve in underserved markets, sometimes they may have great business plans, they make cash flow but there may be some management issues they have to deal with. Because you can be good at your industry but perhaps not good at managing, perhaps not good at fiscal management. And so in order to see you succeed, we can assess that. And from that assessment we’ll say that, “Okay, this borrower needs some assistance.” and market that. “This borrow needs some assistance with financial management.” I may be management. And so we can tell a program for that borrower. And I do think larger financial institutions and banks have a sense but they don’t have the time. Their business model is to provide that technical assistance to those borrowers in that category. Banks give you a loan, you’re on your own.

Talking about addressing the core issues of why African-American business owners are underfunded:

For example, one of the things that I looked at, was that I was lending, I saw the denial rate for African-Americans being higher than the other groups we were serving. And I asked the question, “Why is denial so high?” We found out there were four reasons. One was credit, the second was equity, lack of equity, the third was collateral. Equity and collateral sort of go together because it speaks to… And as broad as this societal gap in wealth, if you don’t have any wealth, if you don’t have any capital, you can’t afford to invest any property, invest in loans. The other thing was the business management. So we designed a program to meet those four areas.

On some special initiatives Carolina Small Business is working on related to veterans and historically black colleges:

One is this whole initiative around small business for veterans. We have a special program, and we’re piloting with two other CDFIs, people out of Texas and Main Street Launch out of California, design a national program for veterans around best practices. How do you effectively lend to veterans, and what metrics are you using to measure impact and success, so we’re proud of that. And we also talked to Bank of America about a program that’s in the design stage. The other piece is that I’ve had this strong interest in women entrepreneurship, and so not only do we operate a women business center, but we have a partnership with historically black college and universities to try to use university resources to extend outside of the walls, into local community trying to build a capacity, and we develop a women entrepreneurship center with a predominately black university and the state African-American university and the state.

The Full Text of CNote’s Interview with Lenwood

00:02 CNOTE: Lenwood, I want to thank you for taking the time to talk with us today. We’re extremely excited to have Carolina Small Business as a CNote partner.

00:13 Lenwood: Oh, delighted.

00:15 CNOTE: Excellent. And I was hoping for people that may not understand or know much about Carolina Small Business, can you tell us about it and its core mission?

00:26 Lenwood: Sure. Carolina Small Business Development Fund is a small business lender. Our mission statement is to provide capital business services and policy and research to support small businesses. So the focus is really upon small businesses throughout the state of North Carolina, although we do provide some lending in South Carolina. So the main focus, small business, augmented by business services with policy and research as a focal point to become a current leader as relates to small businesses, especially in North Carolina.

01:19 CNOTE: How long has Carolina Small Business Development Fund been around?

01:26 Lenwood: Great question. Actually, Carolina Small Business Development Fund started in 18… I mean, [chuckle] 18. 1989, as the North Carolina Minority Support Center, with a focus for providing capital, tactical assistance to a community development credit union. And then we rebranded in 2008 as the Support Center, with a primary mission towards small business lending. Later rebranded in 2016 to Carolina Small Business Development Fund. And the reason for the second rebranding was that we felt the Support Center… People were getting it confused. They thought we were a support agency, and so we think the alignment with the new name, logo… Nothing changed in the mission, on the vision. Just an alignment with the name with the mission.

02:39 CNOTE: Can you tell us a little bit about the communities you serve, and kind of your focus or goals?

02:50 Lenwood: Sure. Sure. A way to look at it is we are a very diverse lender. If you look at our lending across the state of North Carolina, you’ll find that roughly 57% minorities, or people of color. I’m very pleased that over 38% of our lending is to women entrepreneurs, gratified that 18.5% of our lending goes to veterans across this state, as well as about 41% to startups. And let me sort of say that the reason startups are so high is that we are an SBA approved community advantaged lender, which is a pilot program developed by SBA to allow CDFIs to participate in the R7A program. But they renamed it because of the focus to underserved community advantage. And then about 34% are to low income. So as you can see, the lending is very diverse and has reached that underserved market that typically banks, while strong supporters, do not serve because of [1] the risk level of some of our borrowers, [2] credit issues, and [3] size of loans. Those tend to not be accessible for underserved communities and people of color.

04:46 CNOTE: You said a magic word in that response, which was CDFI. And you know, I think a lot of people hear that acronym…

04:58 Lenwood: Right.

05:00 CNOTE: And they don’t really know what it means.

05:00 Lenwood: I know, I know.

05:01 CNOTE: And since you’re an expert, can you give us your one or two sentence explanation of what a CDFI is?

05:07 Lenwood: Yes. Yeah, yeah. Well, you know, one of the things that many people… And I think across the nation, they hear this word CDFI and they wonder, “Well, what is that?” Well, actually an acronym, Community Development Financial Institution, that is certified rather by the Department of Treasury to focus upon providing capital or housing support services to underserved communities, and primarily those communities that have high percentage of poverty, especially persistent poverty. And so the mandate coming from the CDFI fund itself is really serving the truly underserved across this nation. And we’re proud to be a part of our mission and vision, and the vision being greater economic opportunity for our people, it sort of captures the served and the underserved.

06:18 CNOTE: Excellent, yeah.

06:20 Lenwood: Sure.

06:21 CNOTE: So, you talked a little bit about the community you serve, and I was just wondering, when you make these loans do you see kind of secondary effects on the community? And how does that play out?

06:43 Lenwood: Yes. We do a sort of impact assessment analysis of our lending through our borrower survey. We even partnered with the Center for Budget and Tax here in the State of North Carolina, in the City of Raleigh, and developed a sort of matrix, a form of looking at indirect impact. We’d say that when you look at multiplying impact, it’s says that for every loan we make there’s a indirect impact in that community. And I think that’s somewhat abstract, but when you begin to look at it from a simpler model that we developed, it’s simply this; as we make loans, those borrowers hire people, so we add to the employment of those communities. Two, that the borrowers, they pay taxes so you’re adding to the revenue base of those communities. And third, those borrowers are people who buy services and goods, which helps the economic ecosystem of that community, and so as we make loans not only are we helping the borrower to move forward, we are actually helping to build the economy of local communities. Because in the aggregate across this nation, over 85% are small businesses, so what drives this economy and we cannot forget are really small businesses across this nation. And I think sometimes we forget that, and when you talk about small businesses nationally they always talk about regulatory reform being the answer, but no, it’s access to capital that’s being the number one issue. And two, when you look at, when you make a loan it’s more than just a loan to a borrower. Think about all those impacts that I referenced in terms of tax, in terms of savings, in terms of spending, and it all leads to what we say a healthy and resilient community. And so that’s the way we sort of spin it.

09:06 CNOTE: Gotcha. No, excellent points you make there. So one thing I was wondering is, the common conception a lot of people have is, when a small business gets a loan from a bank or something, they get a check and then they get a pat on the back and they say “Good luck” and that’s about it. [chuckle] But my understanding is that a lot of these community lenders like Carolina Small Business Development Fund, they also do other things to assure that the small business or entrepreneur succeeds. Can you talk a little bit about how you work with the people that you serve?

09:44 Lenwood: Sure, sure. One of the things that… We have this premises, that we make a loan, we want to see that borrower’s success story. As a part of that we develop a, sort of a risk rating of every loan we make, and with that risk rating we will establish whether or not this is a borrower that we need to be supportive through our business services, technical assistance support, and so with that we are able to sort of follow our borrower from the time that borrower receives a loan, and to check on that borrower to make sure that they are meeting not only their target goals, but also they’re not experiencing any problem with markets and cash flow, because at the end, we certainly want to see the borrower pay us back, but more importantly we want to see that borrower succeed. Because when you think about it, when that borrower succeeds, look at the economic benefit it plays to that local community. And so it’s more than just giving a borrower a loan, it is really being that partner and trusted business guide with that borrower.

11:08 CNOTE: Excellent. So kind of a shared success model where if they do well and then…

11:13 Lenwood: Yeah, right, right, right. So the borrower does well and you look at the model providing capital to small businesses throughout the state, as those borrowers succeed and pays back, that money is recycled for lending to other borrowers. And so it’s a revolving loan fund, and when revolving say that it turns around, and that’s important for us because we want to see you not only succeed, but help other borrowers in paying back the loan that you received from us.

11:56 CNOTE: Excellent. So you used a word that stood out to me. You used the word risk in your answer before, and I wanted to ask you a little bit about riskiness of loans. And do you think that as someone, as a community lender, as someone who’s really close to the community and the people you serve, does that give you an advantage over big banks as far as understanding the riskiness of your borrowers and the loans that you may issue.

12:26 Lenwood: I do. I think that’s very important. You’ve raised an important point because one of the things we like to do is get to know our borrowers and our borrowers get to know us. And so it’s not that we can scale and trying to scale the loans approved or the number of borrowers. But our mission is to see those borrowers succeed. And so we wanna work with them, exactly where they are and that rating would tell us based upon a number of metrics that we’ve developed to do that. How much and what level of technical system that borrowers need? Because, let’s face it, when you serve in underserved markets, sometimes they may have great business plans, they make cash flow but there may be some management issues they have to deal with. Because you can be good at your industry but perhaps not good at managing, perhaps not good at fiscal management. And so in order to see you succeed, we can assess that. And from that assessment we’ll say that, “Okay, this borrower needs some assistance.” and market that. “This borrowers needs some assistance with financial management.” I may be management. And so we can tell a program for that borrower. And I do think larger financial institutions and banks have sense but they don’t have the time. Their business model is to provide that technical assistance to those borrowers in that category. Banks give you a loan, you’re on your own.

[chuckle]

14:21 CNOTE: Yeah, and that can be challenging.

14:26 Lenwood: It can be, but look at… I wanted to draw this parallel. Look at who banks lend to, small business-wise. They are probably a more seasoned business, more likely not to be a startup, more likely to have been in business, more likely to have demonstrated the capacity to repay, more likely to have demonstrated the capacity to manage and perhaps more likely not have credit challenges. Look at the borrowers that community financial institutions, or CDFIs, typically lend to. Those borrowers are typically underserved, they did not meet the metric requirements of banks, and more often than not, perhaps do not have as much management experience. So they need some independent, undergirding to help them to be successful in the work they do.

15:34 CNOTE: Gotcha, and then that’s where lenders like Carolina Small Business Development Fund and other CDFIs try to come in and, not only help provide capital.

15:45 Lenwood: But also the business services or technical system, which is vital to the success of those small businesses.

15:54 CNOTE: So a little bit earlier, you were talking about this imbalance in capital flows to underserved communities. And at the end of last year, December of 2017, there was a study that the New York Federal Reserve did that something like only 20% of small businesses with employees are owned by women. And then there’s obviously a lot of other statistics related to minority business ownership. In your mind, what are some of the big things we can do as a society to work out these imbalances?

16:32 Lenwood: Great questions. I wanna draw your attention to a commission study that Wells Fargo did. And they did it looking at access to capital, and they found out and they didn’t have to hire researchers. The research firm that did this study, that people of color, primarily African-Americans, Hispanic, Latino, women, and veterans tend to have difficulty accessing capital. Take a rocket scientist to figure that one out, right?

[chuckle]

17:14 Lenwood: And so they developed a program around addressing those disparities. And I think that while they were very effective in doing that, they missed it in some categories. Mainly in that CDFIs, particularly those that are managed by people of color, tend to suffer from some of the same problems and issues that the borrowers they have, that’s around access to capital. And so when you look at those groups, African-Americans, Latino, Hispanic, and women entrepreneurs, and veterans, they do tend to have challenges as relates to accessing capital.

18:05 Lenwood: I think if you would slice each of them out, that they would face different challenges. For example, one of the things that I looked at, was that I was lending, I saw the denial rate for African-Americans being higher than the other groups we were serving. And I asked the question, “Why is denial so high?” We found out there were four reasons. One was credit, the second was equity, lack of equity, the third was collateral. Equity and collateral sort of go together because it speaks to… And as broad as this societal gap in wealth, if you don’t have any wealth, if you don’t have any capital, you can’t afford to invest any property, invest in loans. The other thing was the business management. So we designed a program to meet those four areas. But, in terms of what the larger society can do, and pay attention to trying to… We sort of gloss over these indices, and we do not meet them head on with this whole issue of capital, specifically targeted for the groups that have difficulty accessing capital. We dance all the way around it, but we never directly face it. And until we directly face this issue, we will always be talking about this disparity, between accessing capital for these groups that have that difficulty.

20:03 CNOTE: Absolutely, that’s a great point. And so obviously people like yourself, and funds like Carolina Small Business, certainly play a big role in that. But I wonder if some people don’t fully understand, or maybe don’t appreciate the work you do. I was wondering if you face or notice any common misconceptions about community lending, and is there anything you’d like to clear up, or just clear the record of?

20:37 Lenwood: Yeah, I think you raise important issues. There is a misunderstanding. I think the misunderstanding comes from misinformation, and time to understand these challenges that CDFIs face across this nation. We look at them as being another vehicle to just provide capital for the housing, lending, some other areas, as a support organization. Not as an organization that’s really helping the economy, as well as people within underserved communities. And so, instead of valuing that contribution to the larger economic impact, we tend to devalue the work. And it’s manifested in public policy, where you have public policy around allocation of resources that literally does not put money in for CDFIs, and a proportion needed to address some of the great problems facing underserved communities.

22:00 Lenwood: We put money in infrastructure, we put more money in symphonies than we do in CDFIs, serving the economies and people, these various communities. And so if you look at nationally, for example, and the CDFI fund itself, where the administration is trying to cut funds out. And when you cut funds out to allow agencies that’s been working for years trying to address inequality, then you’re making a statement that you’re devaluing the work of these CDFIs. I think one, there’s not enough time to understand the work we’re doing, the contribution, and building a strong ecosystem within local communities. And thirdly, more importantly, we tend to devalue the work they do, and not value the contribution in building access to capital, building strong communities, whether it’s in housing or job creation. That’s my platform. You hit a nerve for me.

[laughter]

23:19 CNOTE: Well yeah, you’ve got it down. You’ve certainly convinced me. And I think one thing that maybe some of our policy makers maybe overlook is that my understanding, and maybe you can speak to this a little bit more eloquently than I can, but I think the return on investment is extremely high for these programs. So if you’re at building a freeway, or maybe the RIO is higher for some these CDFI support projects, right?

23:47 Lenwood: Yeah. Well, how do you measure that? And I don’t think people ever think about the measurement of return on investment. When you look at a number of housing projects in underserved communities, that that would not have been there unless that CDFI had put it there. Or the borrower whose life has been made much more fuller by resource of capital to start a business. And then you look on the return investment about the money you put in and the benefit that goes in those local communities. And I don’t think we really have accurately captured the total return on investments within local communities, or the return on investments that CDFIs yields to the greater economy across this nation and the various communities they serve in various state. It’s just huge. When you look at some CDFIs that are in new market tax credit, that are scaling businesses. If you look at CDFIs that are doing housing projects, that are creating new housing alternatives for low income neighborhoods. Look at CDFIs that are providing lending like Carolina small business. Some [small business owners] who had dreams and are able to fulfill their dreams, that’s why we call ourselves ‘being dream catchers’ because, we think, that one of the things we do is help people realize their dreams. So, you brought up an interesting point, that is the return on investment, very important, underestimated, not accurately captured.

25:46 CNOTE: Yeah. So, my interview with you today is part of our Change Maker Series. So, I can’t let you off the hook, I wanna ask you some questions about yourself.

26:00 Lenwood: Sure.

26:01 CNOTE: And for those listening, just to remind everyone, we’re talking to Lenwood V. Long, the CEO of the Carolina Small Business Development Fund. But I wanted to ask you a little background, where did you grow up, and did you ever think that you’d be doing what you’re doing today?

26:20 Lenwood: Well, I grew up in rural North Carolina, a little place called Bayboro, North Carolina. Proud to be a product of that rural America, and I grew up in time of segregation. I grew up at a time where I never thought a guy from Bayboro, North Carolina, would not only be a CEO of a community development financial institution. But really never imagined that I’d be in a position to help people fulfill their dreams, realize their aspirations, and be an advocate for change. And this whole movement towards decreasing the wealth gap that we see in this nation among people of color. And I’m excited to be on this mission. And I must confess, another part of me is ministry, that I’m an ordained minister and a pastor at church, so I’m not ashamed of that. And so that’s another area that I never thought I would be in but I believe in this saying of “Divine destiny”, and so I think both of ’em goes hand in hand. This mission work, I call this mission work, of helping the underserved as well as spiritually nurturing people as well.

27:56 CNOTE: Oh, that’s excellent, really inspiring. Obviously, you’re doing fantastic work, it looks like kind of with everything you touch. My understanding is that Carolina Small Business Development Fund is done extremely well under your leadership, and I was just wondering if there were any specific accomplishments that you were most proud of personally.

28:23 Lenwood: Well, again, yeah, I’m really proud of the team that I’ve been blessed to help me carry out this mission of serving the underserved, through the organization that we’ve been blessed to lead. And the accomplishment for me is this team spirit that we have. And I don’t take credit for anything. Everything I’ve been able to accomplish is through a great team that I’ve been blessed to have. So I guess I would frame the accomplishment around this team that we’ve assembled to make this impact in local communities across the state.

29:19 CNOTE: That’s a great way to look at it. You know, it takes a big group of people to do big things, and it sounds like you guys are doing that there.

29:28 Lenwood: Yeah, it does. It does. It does. It really does. And other thing is, I’ll always, I’m proud of being a Vietnam veteran, that I can also inspire other veterans to go for it. Try to follow your dream, follow your passion, be risk takers, make things happen. So, never allow whatever you are scared of be your destiny. Try it, move it. You feel it, move on it.

30:05 CNOTE: Excellent. Yeah, well that’s great advice. Actually, that makes me want to ask you another question I like to ask people. If you could go back in time and give twenty-year-old Lenwood some advice, [chuckle] what would that look like?

30:24 Lenwood: Oh, man. It would be, “Lenwood, grow up.”

[chuckle]

30:32 Lenwood: Yeah. You know what, I would tell him, “Follow your passion around where you would like to go.” Because one of the things you understand, Lenwood at 20 years old was fighting a war and had no idea why he was fighting that war, and I learned this out of survival in a war setting. And that taught me life lessons in many ways. Left some scars, sure, but it taught me some things, too, that I will forever cherish about life.

31:12 CNOTE: Wow. Yeah. I was gonna ask you, you talked about being a veteran and if I recall correctly, I think you guys may be doing some special initiatives, or is there anything…

31:26 Lenwood: We are, we are.

31:28 CNOTE: Yeah, so what are those initiatives that Carolina Small Business Development Fund’s working on right now?

31:34 Lenwood: Well, we have a… There’s two. One is this whole initiative around small business for veterans. We have a special program, and we’re piloting with two other CDFIs, people out of Texas and Main Street Launch out of California, design a national program for veterans around best practices. How do you effectively lend to veterans, and what metrics are you using to measure impact and success, so we’re proud of that. And we also talked to Bank of America about a program that’s in the design stage. The other piece is that I’ve had this strong interest in women entrepreneurship, and so not only do we operate a women business center, but we have a partnership with historically black college and university to try to use university resources to extend outside of the walls, into local community trying to build a capacity, and we develop a women entrepreneurship center with a predominately black university and the state African-American university and the state. And then we’re doing another, sort of piloting one with the YWCA. We call it the Coast of Veteran Women’s Center, and it’s all around trying to be a leverage and partnership with underserved sectors that we need, and this is a passion area of ours and our HBCU initiative, that is working with historically black colleges and universities throughout the state, piloting programs where you can have sustainable impact in local communities. And another trademark is the Innovation Entrepreneurship Center that we developed with Shaw University, which is a historically black college and university. Sort of unique, sort of different, but it is outside of the box thinking to address disparities that we saw within local communities. We see a need and we are brazen enough to address it. And we’re not afraid to do some things that are different.

34:14 CNOTE: Yeah, well, I think for big problems you have to take creative approaches, so it sounds like you’re testing everything you can and trying to find…

34:22 Lenwood: Oh we can. Yeah, you’re right. You’re right, absolutely right. We’re proud of those initiatives.

34:29 CNOTE: Excellent. I was gonna say that all of these initiatives you’re doing sounds like a big undertaking, but I was wondering too, if you had any big goals for the next five to 10 years for things you’d like to do with Carolina Small Business Development Fund, or…

34:47 Lenwood: Well, one of the great challenges of CDFIs, and especially CDFIs managed by people of color, is sustainability. And my goal over the next two or three years is trying to develop equity for Carolina Small Business Development Fund, to increase its sustainability ratios, to decrease the dependence upon grants and from state or federal government to survive. Because as we know, that with government being less responsive to community needs, then there is this reluctance, again, policy decision, this reluctance to invest in community development financial institutions, especially those managed by people of color. And you hear a lot of folks, “I’m not racist,” but their policies have racial impact because they are designed to not increase the wealth creation opportunities in local communities that are in need, but they decrease and devalue those communities. I keep using this word ‘devalue’ because I think that’s what’s happening. We devalue the work of CDFIs, we devalue small communities, underserved communities, by not investing in them. And so, this is this, we talk about wealth gap. The gap between investments is still strong in this country and in many states. While we’re saying politics sort of being oblivious to these community needs, and it’s racial politics as far as I’m concerned, that’s another form of gerrymandering that we don’t even talk about. You got mental soapbox. [laughter]

37:04 CNOTE: Hey you’re really close to these issues, and you’re touching them and seeing how that impacts lives on a daily basis, and I think it’s good to share your perspective with people. Like me, I’m in California and I don’t necessarily see what you see, so it’s always good to get other point of view. I don’t wanna take too much of your time, but I do have a couple, kind of practical questions that I wanna end on. And also, if you have anything to add, please. It’s great talking to you, but I think, one thing I wanted to ask you is, you talk about CDFIs needing help and support, and so, for those looking to support CDFIs like Carolina Small Business Development Fund and other CDFIs across the country, what recommendations would you make to someone, and how they can help?

38:01 Lenwood: The recommendation that I make is, look at the mission of CDFIs such as Carolina Small Business Development. Sort of meditate on that mission. Chew on that mission for a moment. And then, when you go through the vetting process, vet not only the financial information that rightfully you need, but flavor that vet and… With the fact that these organizations are serving people that would not be served but for. And that but for is very important. But for the services Carolina Small Business Development Fund, over the past eight years or nine years, over 600 businesses probably would not have been served. For the moment, $44 million would not have been disbursed to small businesses across the state but for Carolina Small Business Development Fund.

39:22 Lenwood: And so, the fact that it provided loans to individuals and categories and sectors that are unmet, and when you vet that temper it with all those factors, and perhaps your vetting would be a little different. I understand that the risk rating that you have to do. I understand the responsibilities, but I don’t think there’s enough attention paid to the mission and the work they’re doing. Sometimes they get overshadowed by the fact that, “Can they pay back?” Right? We get that. We understand that. Wanna be responsible for that, but I guess there’s a holistic approach that I think that need to be taken.

40:19 Lenwood: The other thing I would say is this, CDFI managed by people of color tend to, and I’ve said this before and I keep saying it, tend to suffer from some of the same problems that the borrowers they serve so well, suffer from, and that is access to capital. If you look at the balance sheet of CDFIs managed by people of color, and look at balance sheets of those that are not people of color, I guarantee you, if you look at the time they started and the time they are now, most of them would be great or larger, would not suffer from capital needs as much as CDFI managed by color. And so again, there’s allocation of resources to CDFIs, there’s inequity. And so I don’t think that has been addressed. We say we’re committed to CDFIs, but not really to all of them in the same magnitude. And that’s, again, something that, nationally, that I’m addressing and I’m not bashful about addressing it.

41:37 Lenwood: I’m convening along with couple other people, a group of CDFIs that led by African Americans, to begin to address this issue and looking at all alternative financial. That’s why we invited Catherine to be a presenter at this meeting, so that CDFIs managed by people of color, African-American, understand and we understand that what we go through the [capital acquisition process], we get vetted out many times. We are not looked at with the same lenses as other CDFIs. So that’s saying a lot there. But those things that I would ask people to look at when they look at CDFIs like Carolina Small Business Development Fund. Look at that mission and meditate on that.

42:35 CNOTE: Excellent point about viewing the issue holistically and looking at everything that you can look at. And just to clarify, if someone’s listening, Lenwood’s talking about Catherine Berman, she’s the CEO of CNote, which is a financial technology company that is working to be a new capital source for CDFIs, like Carolina Small Business Development Funds. That’s a partnership we’re really excited about. And hopefully can be a long-term source of capital and help you guys do the great work that you’re doing. One more practical question I have for you, is let’s say someone in rural North Carolina happens upon this interview somehow, or somewhere else in the country. And they have a small business idea. And they’re an entrepreneur. And they wanna secure a loan. What do you tell them, or what kind of advice can you give to them to embark on that journey and make it more plausible that they end up succeeding in their mission?

43:45 Lenwood: If they’re a small business and happen to run across this interview and become intrigued by what they’ve heard and wanna fulfill their dreams, I’ll say what, go for it. You can go to our website, Carolina Small Business Development Fund. Just put that in and it’ll pop up, and you’ll see on our website how to apply on each page at the top of the page. That is how to apply for a loan. And when you tap that, click that button, it will take you through the application process. Or more likely, we have regional satellite offices throughout the state. And a few in the Charlotte area, there’s a satellite office, a few in Nashville, a few in Fayetteville, a few in Greenville. They tend to work the region. And so go to that website. And you will find it. And if all else fail, I tell them to call me. And I will certainly put you in the right direction. And you’d be surprised at the number of people that call me or email me. And I don’t know how they get my email address, but they get it.

[chuckle]

45:12 Lenwood: But one thing they can always say, Lenwood responds.

45:18 CNOTE: Nice.

[chuckle]

45:20 CNOTE: Well, I don’t want to take up anymore of your time, Lenwood. It’s been an absolute pleasure to talk with you and learn more about you and Carolina Small Business Development Fund and all the great work that you’re doing. And on behalf of everyone at CNote, we’re really excited to be working with you and helping you along with your mission, because you’re really where the rubber meets the road. And you’re doing amazing work to increase economic equality in the United States.

45:49 Lenwood: Well, I hope I was able to one, provide you with kind of information you need about Carolina Small Development Fund. And two, perhaps you got a glimpse of me as a person as well.

46:02 CNOTE: Great. Well, thank you so much, Lenwood.

46:05 Lenwood: Thank you.

==End of Interview==

Conclusion

Learn more about Lenwood and CSBDF.

Visit CNote and learn how you can use your dollars to support the mission of CDFI’s and change makers like Lenwood as they work to build a more inclusive economy across America.

By CNote

A letter that may make capital more socially conscious for decades to come

Larry Fink, the CEO of BlackRock just sent an open letter to the CEOs of publicly traded companies outlining his expectation for how these companies engage with society and act as good corporate stewards.

The letter tells companies that they need to stop with the myopic quarterly earnings focus, and instead serve a broader social purpose benefiting all stakeholders, including the communities they operate in.

Read More

By CNote

SF Women’s March

Our democracy lives and dies by the ability of the people to raise their voices, hold their government accountable, and to participate fully in the political process.

In honor of rallying to assure everyone has an equal voice, some of the CNote team got together and attended the #WomensMarch2018 held in San Francisco this weekend.

Read More

By Borrower Stories

INCAUSA – Indigenous Social Entrepreneurship meets community lending

Incausa – In the cause of others.

Today, CNote is profiling Incausa, and its co-owners, Vinicius and Carolina. Together, they’ve built a company that sells unique goods across the globe but also supports indigenous artisans by selling their crafts and returning 100% of the proceeds to them. Incausa received a loan from a CNote partner that allowed them to scale their company without sacrificing their social mission. 

Read More

By CNote

CNote’s CB Insights Demo Day Presentation

Demo Day was a great opportunity to share the CNote story with a diverse group of industry thought leaders.

More than anything, CNote is excited to be recognized as one of “40 of the most ground-breaking early-stage startups” out of a pool of more than 2,000 applicants. Read More

By Borrower Stories

Traveler: More than a business—A unique and close-knit community brought to life by a simple loan

Here at CNote, we fight for financial empowerment. That sounds like a lofty sentiment, but oftentimes it plays out fairly simply in reality: small businesses need loans, and CNote provides community lenders with the funds to make more of these loans. Traveler is one of the many success stories associated with community lending. We’re excited to share the story of Julie Cox and her small business, Traveler. Read More

By CNote

CNote​ ​​Selected​ ​to​ ​Present​ ​at​ ​CB​ ​Insights’​ ​First-Ever​ ​Demo​ ​Day​ ​as​ ​Part​ ​of the​ ​Fintech​ ​Category

Yay impact investing, yay CNote! 

We are proud to announce that CNote has been chosen out of a pool of more than 2000 companies to present at CB Insights’ Demo Day Conference. We’re honored to be one of the “40 of the most ground-breaking, innovative companies” selected this year. Read More

By CNote

Women in Tech: Making Strides

Cat Berman, CNote’s CEO, was invited to speak at the Women in In Tech symposium at UC Santa Cruz’s Silicon Valley Campus.

The purpose of this event is to: “highlight the experience of women in the tech industry—from established companies to startups and the venture capital firms that support them,” and to “recognize those who have championed the advancement of women in technology through the WITI@UC Athena Awards.” The event also did a great job of assuring that attendees left “with actionable suggestions for overcoming gender-based challenges and improving the workplace climate for all.” Read More

By CDFIs

What is a CDFI? – Community Development Financial Institutions Explained

What is a Community Development Financial Institution (CDFI)?

Updated October 2019

Community Development Financial Institutions, more commonly referred to as CDFIs, are financial institutions that provide loans and other financial resources to communities that are often ignored by big banks and traditional financial institutions. 

CDFIs are federally certified entities. That certification comes from the CDFI Fund, an agency within the U.S. Department of Treasury.

CDFIs trace their origins to local credit unions and banks that sprang up to address predatory or exclusionary lending practices like redlining in communities across America.

This article will explain how CDFIs work, their history, and their positive impact on society.

If you’d like to dig deeper we’ve also created a more quantitative industry overview, which you can download and read via this link: CNote Whitepaper – Overview of the CDFI Industry (pdf).

Since CDFIs are a fundamental part of CNote’s impact investment offerings, and we make it easy for anyone to invest in CDFIs, understanding CDFIs will provide you a more complete understanding of the positive impact an investment in CNote has on communities across America. 

Preamble: The hard work CDFIs have done over the last two decades.

Historically, CDFIs have been a productive, if underappreciated, asset class. The Brookings Institute had the following to say when looking back at decades of historical data on CDFIs: “CDFIs have succeeded by all obvious measures. A recent sampling of CDFI performance found that 81 CDFIs managing $1.8 billion in assets had provided more than $2.9 billion in financing. They did this with a 1.8 percent cumulative loss rate, consistently low delinquencies, and no losses of investor principle.”

Community Development Financial Institutions (CDFIs), the basics.

At their core, CDFIs provide loans, and financial services to underserved markets and populations. Generally, CDFIs are profitable, but not necessarily profit-maximizing, this means they put a priority on enriching their community over enriching their shareholders.

Accordingly, a CDFI’s success is measured, not only by their financial performance but also by their impact on underserved communities, including the funding minority and female entrepreneurs and the building of affordable housing. So along with return on investment, CDFIs look at the jobs they create or save, and the prosperity they bring to a given community as benchmarks for success. 

Typically, CDFIs come in four different forms, banks, credit unions, development loan funds, and venture capital funds. Each of these four institutional models serves a different part of the community and may have different risk profiles, legal structures, and target lenders. This presentation from the CDFI Fund provides a good breakdown of assets under management for the various CDFI institutional types, their sources of funding and their community impact.

Filling a funding gap.

CDFIs work to provide lending to individuals and communities that may go overlooked by mainstream banks and lenders. These are communities that have limited access to capital, and the prosperity that access can bring. The loans that CDFIs make are generally targeted and have a tangible impact on their local community. The money is used to fund loans for small businesses, develop affordable housing, build community facilities, and launch or expand other community programs. 

The Community Development Financial Institutions Fund (CDFI Fund), which will be discussed further below, explained the history and the need for CDFIs in more detail:

Community Development Financial Institutions—or CDFIs—emerged in response to a lack of access to responsible and affordable credit and capital in minority and economically distressed communities. The CDFI “movement” took shape in the 1970s with the passage of the Community Reinvestment Act, which encourages financial institutions to meet the needs of all sectors of the communities they serve. Amid growing concerns about the social consequences of investment decisions made by the financial services industry on the nation’s low-income communities, early CDFIs began filling a niche by providing capital and credit in areas that are often difficult for traditional financial institutions to serve. (source)

To summarize, CDFIs strive to bring financial services to individuals and businesses that are generally overlooked by traditional financial institutions. These loans are not giveaways, they must be repaid, but they help underserved communities sow the seeds of self-sustained growth. These loans empower people to take control of their financial destiny. 

An example of a successful CDFI is Main Street Launch. They are a bay-area CDFI that serves communities and entrepreneurs throughout Oakland and San Francisco. Their mission is to “provide business owners with capital, education, and relationships that allow them to flourish.” The following video highlights some of the real-world success stories that come through CDFI-lending programs like Main Street Launch.

Looking again at the Brookings Institute’s comprehensive retrospective on CDFIs, Taking Stock: CDFIs Look Ahead After 25 Years of Community Development FinanceBrookings found that “CDFIs have helped prove several things, many of which now constitute mainstream market thinking.” Those included:

  • “that financing women and minority homeowners and business owners is not only possible but profitable, and that race and gender are not reliable indicators of financial performance”
  • “that conventional ideas about managing financial risk have changed and therefore will change in response to evidence that the un-conventional is possible”
  • “that managing risk in non-financial and non-traditional ways (such as intensive technical assistance) can work”
  • “that unconventional financial customers are important to conventional financial service companies because they are future customers and solid assets,” and
  • “that community-centered groups can organize capital, manage it responsibly, pair it with organized people, and create measurable changes in communities.”

The legal framework behind CDFIs

Individual CDFIs are certified by The Community Development Financial Institutions Fund (CDFI Fund). The CDFI Fund is an agency within the U.S. Department of the Treasury, that was established by the Riegle Community Development and Regulatory Improvement Act of 1994.

The CDFI Fund’s mission “is to expand economic opportunity for underserved people and communities by supporting the growth and capacity of a national network of community development lenders, investors, and financial service providers. You can read more about the CDFI certification process here. CNote only invests money with CDFI-Fund certified institutions.

CDFIs, which are certified by the CDFI Fund, then go on to make loans throughout their local communities. The CDFI Fund summarized its model as follows:

The CDFI Fund supports the mission-driven financial institutions working on a local level that know their communities best. Financial institutions that become certified by the CDFI Fund are eligible to apply for the comprehensive services it offers—including monetary support and training to build organization capacity. The CDFI Fund’s model is competitive and each of its programs provides CDFIs with the flexibility to determine the best use of limited federal resources in their community.”

(source)

The aim of the CDFI Fund “is an inclusive economy: an America where all citizens have the chance to participate in the mainstream economy.” CNote echoes this goal by directing more capital to these CDFIs, which allows them a broader reach in their mission of financial empowerment. 

The economic impact of CDFIs, and the CDFI Fund.

CDFIs have a significant impact on the economic growth of the United States. In 2016 CDFIs provided over $3.6 billion dollars in financing to underserved communities (source). While the focus of CDFIs may be on their local communities, these local activities can have a real impact on the broader economy. Here are the 2016 results as provided by the CDFI Fund:

In fiscal year 2016 alone, CDFI Program awardees reported that they provided $3.6 billion in financing to homeowners, businesses, and commercial and residential real estate developments. These developments include the construction of community facilities in communities that might not otherwise have these amenities. In addition, CDFI Program awardees financed over 13,300 businesses and provided more than 427,000 individuals with financial literacy or other training. Similarly, in 2016, over $3 billion in loans and investments were made possible under the New Markets Tax Credit Program, with over 74 percent of the loans and investments made in Severely Distressed Communities. This critical financing contributed to more than 10,000 jobs and an estimated 26,000 construction-related jobs; and resulted in more than 600 affordable housing units, 10.1 million square feet of commercial real estate, and 5,500 businesses receiving financial counseling or other services.

(source)

This data shows just how concrete of an impact community-focused lending can have on the broader economy. These investments in small businesses and community development lead to tangible job growth and economic prosperity. In summary, CDFIs help deliver economic opportunity to everyone. To that point, this video illustrates the kind of opportunity CDFIs provide to borrowers:

 

Another, often overlooked, benefit of CDFIs is that because they are locally focused they provide tailored guidance and insight to the entrepreneurs they support. These CDFIs know the common issues small businesses in their communities face, and they can help them navigate hurdles and find a more direct path to success. An example of this local expertise and guidance was the advice the Excelsior Growth Fund (a CNote-partner CDFI) was able to provide Ingrid Murray and her company Prospect Cleaning. Excelsior Growth Fund not only helped finance Ingrid’s business, but they helped her review and negotiate critical contracts and create financial projections to guide the direction and strategy of her business.

CDFIs do much more than cut a check and walk away. They provide guidance, support, and expertise. They share success with their borrowers. By extension, every investor at CNote shares in the success of our partner CDFIs as they work to increase the access to capital and create more inspiring stories like Prospect Cleaning.

Are CDFIs riskier because they invest in underserved communities?

The riskiness of CDFIs has been evaluated in detail, and the general consensus is that CDFIs do not present significantly more risk than non-CDFI institutions. In late 2014, two independent reports on the CDFI program “found that CDFIs have no more risk than conventional lenders and that they perform nearly just as well as mainstream financial institutions.” The first report, CDFIs Stepping Into the Breach: An Impact Evaluation Summary Report, undertaken by Michael Swack, Eric Hangen and Jack Northrup from the Carsey School of Public Policy at the University of New Hampshire made the following key conclusions:

  • CDFI loan fund lending fills market gaps for key underserved low-income populations;
  • CDFI loan funds deliver between roughly two-thirds to over ninety percent of all loan volume to borrowers living in a CDFI Fund-designated Investment Area;
  • From 2005 through 2012, CRA reported lending decreased while CDFI loan fund reported lending more than tripled, and during the recession, this activity provided a counter-cyclical boost to the economy;
  • CDFI loan funds provide borrowers that may not qualify for loans from mainstream sources with loan terms and interest rates that are still comparable to mainstream products; and
  • The CDFI Fund is the second largest-source of equity to CDFI loan funds after internally-generated funds.

CDFIs, like any financial institution, are not without risk. However, CDFIs do have the benefit of certain federal programs like the CDFI Bond Guarantee Program, which provides federal guarantees for bonds issued by CDFIs that make investments for eligible community or economic development purposes. We note that every investors’ risk appetite can vary. You should not take the research cited below as investment advice, and should consult with a financial adviser to find the investment that is best for you. 

The second report, Introduction to Risk and Efficiency among CDFIs: A Statistical Evaluation using Multiple Methods, conducted by Gregory Fairchild from the Darden School of Business at the University of Virginia and Ruo Jia from the Stanford Graduate School of Business determined:

  • CDFI banks and credit unions were found to have no more risk of financial failure than mainstream financial institutions, even after controlling for the CDFIs’ degree of involvement in the mortgage market during the financial crisis; and
  • Despite serving predominately low-income markets, CDFI banks and credit unions had virtually the same level of performance as mainstream financial institutions.

This research suggests that CDFIs, when managed properly, can deliver returns at or below the risk profile of their non-CDFI counterparts. If you want to dig deeper into the industry, the CDFI fund makes comprehensive CDFI performance data available through its data collection system, known as the Community Investment Impact System (CIIS). This level of transparency and reporting assures that CDFIs remain a trusted source of funding for years to come.

Leveraging CDFIs as a way to invest in economic inclusion

In September of 2019, CNote co-hosted a webinar with leading CDFI, Access to Capital for Entrepreneurs (ACE). You can watch the webinar below or register and watch it on demand anytime here.

The webinar introduces Community Development Financial Institutions (CDFIs) as an impactful and competitive investment. Highlighting their strong history of providing economic resources to financially underserved communities across America, helping to create jobs, fund small businesses, and support affordable housing development.

Large banks and foundations of all sizes have been investing in CDFIs for decades. Until recently, investing in a diverse pool of CDFIs at scale presented significant challenges for all but the savviest of investors. Now, with CNote, investors of all sizes can deploy capital across a diverse pool of CDFIs with ease. What are CDFIs?

This presentation provides an overview of the CDFI industry, its history, how CDFIs are certified by the Department of Treasury, their mission and the types of investments CDFIs make in the communities they serve. Most importantly, this webinar will explore the way increased capital access and CDFI lending activities can have a transformative effect.

How do I invest in CDFIs?

Prior to CNote, investing in a CDFI was difficult and generally limited to qualified high-net-worth investors or to individual CDFIs on a case by case basis. 

Now, with CNote, any individual can invest as little as $5.00 in CDFIs to earn a higher return on their savings and have an impact on communities across the country. CNote is the first company to make CDFIs, as an asset class, readily available to all investors. If you are interested in investing in community development and want a better return on your savings, CNote might be a good option for you

 

By Small Businesses

Pandia Health – An inspiring story of a female entrepreneur that is improving other women’s lives

The Kind of Company, and Entrepreneur, That Inspires Us

At CNote, we a believe in underdogs. Our mission is to deliver financial empowerment, both to savers, and to financially underserved communities. Your investment in CNote drives community development projects, and provides the funding female and minority entrepreneurs rely on to get their businesses off the ground.

Often, its hard to envision what these companies might look like, who runs them, and how they impact the world. Today, we highlight Pandia Health and its CEO, Sophia Yen, MD, MPH, as an example of the kind of change that can occur when a motivated entrepreneur is given the capital to execute on her dream.

Dr. Sophia Yen has over 20 years of experience in medicine. She serves as a clinical Associate Professor of Pediatrics in the Division of Adolescent Medicine at Stanford Medical School. She graduated from MIT, UCSF Medical School, and UC Berkeley with a MPH in Maternal Child Health. Dr. Yen co-founded Pandia Health and enjoys educating the public and other physicians about birth control, acne, weight management, and other adolescent health issues. 

The Pandia Health Peace-of-Mind, Taking The Pain Out of Reproductive Health

For the vast majority of the women who use it, birth control can be a real pain in the uterus. It’s a pain to swallow a pill every day. It’s a pain to drive to the pharmacy once a month to refill the prescription. But most of all, it’s painful to stress over the possibility of an unplanned pregnancy and the life-altering impact it can have.

Dr. Sophia Yen, co-founder and CEO of Pandia Health, calls it “pill anxiety.”

“You’re going through your pills and you get to that last week; and if you don’t get to the pharmacy, there will be a dire consequence. And so you have that stress in the back of your mind every single month,” she explains, speaking of her own experience as well as that of millions of other women. “And so that is the goal of Pandia Health…to cure women of this pill anxiety.”

“Set it and forget it; don’t run out on our watch.”

Indeed, when it comes to birth control, Pandia Health has taken over the watch. Through its website the company offers two main services: 1) monthly deliveries of birth control to the customer’s door, billed to insurance; and 2) telemedicine prescriptions costing a flat rate of $39, valid for a year. By taking over the responsibility of refilling birth control, Pandia Health has cured pill anxiety with what Dr. Yen dubs “Pandia peace-of-mind.”

Pandia Health’s Mission, and Drive, Comes From its Founder

From the way Dr. Yen speaks of her company, it’s clear that it is a source of pride and joy to her: “We are busting open access, and that’s what makes me happy: saving women stress, preventing unplanned pregnancy.”

An MD and MPH in Maternal Child Health, Dr. Yen has a demonstrated passion for women’s health and reproductive rights. Pandia Health is a natural extension of that focus. Indeed, it was in preparing for a talk about birth control that she conceived the idea of Pandia Health. 

“I came across this statistic that one of the top three reasons women don’t take their birth control is they don’t have it on hand,” she recalls. “And I said, ‘This is easily solvable.'” 

But her passion to solve such problems began even before that.

When Sophia Yen was 15, she ran a pregnancy test. The test wasn’t for her, but for her 13-year-old client in a pregnancy counseling program. And it came back positive.

“That was life altering for that patient forever,” Dr. Yen recounts. “It just made me sad to see the two different trajectories: I was going to head off to college and off to medical school, and she was going to head off to a life of teen pregnancy. And so I realized then how critical it is that people have access to birth control and comprehensive sex ed.”

Since then, she has not stopped “busting open” that access. Nowadays she continues to take joy in her work, motivated by the impact she can have on young lives with her work.

The joy is clear in the way she treasures her customers. Admiring their initiative to prevent unplanned pregnancy and make their lives easier, she calls them all “beautiful” and includes “fun things, randomly” in their shipments, such as chocolates, sunglasses, and condoms. On the rare occasion that there’s a problem with a refill date, she contacts the patient’s pharmacy to make sure patients have access to a new prescription before the pills run out.

In the end, the personal and professional commitment that characterizes Dr. Yen’s work comes from a passion to empower women to control their own destiny. She’s said that her life’s work is to make women’s lives easier by saving all the unnecessary effort that goes into getting and using birth control. Her commitment to reproductive health is consistent, from the bumper sticker on her car, to the playful uterus-shaped pendant that adorns her necklace. 

Turning Challenges Into Opportunities

In the early stages Pandia Health’s founding, the passion was there, but the money was not.

“The financial part is always ugly in the beginning…Funding-wise, you just have to bootstrap it or suck it up until you get money,” says Dr. Yen.

But her efforts to “bootstrap it” and secure funding at investment pitches were met with some resistance: namely, the barrier of many potential investors not understanding the problem because they had never experienced it personally.

In addition to uncertainty in the cause, there was also some uncertainty in Dr. Yen herself as a potentially successful entrepreneur. From the female founders before her Dr. Yen quickly learned to “never bring your male CTO or co-founder next to you, because they [investors] will be looking to him to approve, even though you’re CEO, even though it’s your idea, even though you brought the whole team together.”

Aside from gender bias, there was the perceived disadvantage of her being a physician (who are not traditionally credited with good financial intuition) and being a mother (who are not traditionally credited with having much time on their hands).

But rather than being weaknesses, Dr. Yen argues these unique life experiences helped her succeed. As a physician and mother, she was accustomed to working hard. And as a woman entrepreneur, she was able to anticipate being judged on accomplishments rather than potential. She knew she had to work harder and be more proactive than most if she wanted Pandia Health to succeed. So, she arranged a team of five multi-disciplined founders to make sure that they “could absolutely do it” before they asked for money.

Talk about weaknesses being turned into strengths.

It turned out that the “weaknesses” perceived by some investors became Pandia Health’s saving grace in other circles of investors. Namely, the cause for accessible birth control that turned 70-year-old male investors away, was admired and supported by organizations who liked to invest in social entrepreneurship, like OneWorld and Women’s Startup Lab.

Through such organizations, Dr. Yen was able to not only secure investments, but also access networks where she could exchange resources with other “femtech” companies for the mutual benefit of both. 

Pandia Health’s Impact

Now, three years after her initial idea, Dr. Yen continues to strive for solutions to the women’s health issues she is passionate about. With an adaptable mindset picked up from MIT, and a work ethic refined in medical school, she pivots her business in directions best suited to her customer’s needs: starting an ambassador program to increase awareness on college campuses; raising money to expand services nationwide and establish Pandia Health’s own pharmacy.

Of her company’s growth, she says, “We see a future where we start with birth control, we gain women’s trust, and we grow with them as they grow. So there’s huge potential, and you have to be flexible, you can’t be in a set mindset.”

But although the growth path is open to change, one thing is constant: The company will adapt itself to respond to women’s needs. It has done so from the very beginning and will continue to do so. And that is what women can count on for continued Pandia Health peace-of-mind.

Dr. Yen has shown us the impact a dedicated entrepreneur can have on the world. The money invested in Pandia Health has been a force for good in the lives of the women the company has served. Because Pandia Health predates CNote, we have not deployed any investment dollars in Pandia Health directly, but we will continue to work to drive dollars to entrepreneurs like Dr. Yen and share their inspiring stories, regardless of their funding source.

Pandia Health Today

Pandia Health is looking to expand its services nationwide and continue serving women in the most convenient, pill-anxiety free way possible. Their work is more relevant than ever, now that affordable birth control has become even less of a guarantee given the recent defunding of insurance-covered contraceptives.

To find out more about Pandia Health’s services and impact, visit their website: https://www.pandiahealth.com

For FAQs with Dr. Yen about birth control, women’s health, and more, take a look at their Youtube channel and blog

 

Dr. Yen encourages those interested in women’s health and advocacy to support the Silver Ribbon Campaign. That charity serves as an advocate for the respect of women’s reproductive rights.

Additionally, Pandia Health has created a Birth Control Fund to provide “financial assistance to women in need of access to birth control.” You can read more about that program here.

 

 

By CNote

Launch Coverage Recap

CNote made history with its launch to non-accredited investors on September 27, 2017. We are the first company to offer everyday investors seamless access to the reliable return and social impact of CDFIs. This launch was built on thousands of hours of effort. We are grateful for all the support and help we’ve had along the way.

Launching the first impact-focused savings product is a huge step towards our goal of delivering financial empowerment to even more people.

Read More

By CNote

CNote’s Triple Protection Infographic

At CNote, we know trusting someone else with your money is a huge deal, that is why we built multiple layers of protection into every CNote account. These layers of redundancy help minimize the risk of capital loss. While our CDFI partners have never lost a single investor dollar, we want you to feel confident about your investment in CNote. Knowing that your investment has a strong history of consistent performance is one thing, knowing that you’re likely protected even if something goes wrong is even better.

 

The infographic below helps explain CNote’s Triple Protection Plan. If you want to read further, you should review our Risk & Return page.

By CNote

CNote selected as one of TechCo’s top 100 startups of the year

We’re excited to announce that CNote has been selected as one of the top 100 companies to compete for TechCo’s startup of year!

WooHoo! Put your party hats on.

This means we’ll be pitching at the Innovate and Celebrate conference in San Francisco. We’re hoping a little home-field advantage works in our favor. This is the first time CNote has presented at this event so it promises to be exciting.

The conference is co-hosted by Consumer Technology Association (CTA) (they run another event you might know, CES) and TechCo Media.

We’re looking forward to sharing CNote’s story with even more people, and seeing what some of the brightest and most innovative entrepreneurs are up to. Along with spreading the word about our mission of financial empowerment, we’d be lying if we said we we’rent just a little fired up for some friendly competition. Also, its hard not to discount all the inspiration you come away with after attending an event like this.

Click the very official badge below to see the other semifinalists and cast your vote for CNote!

We’re also excited to announce that of the 100 semi-finalists, 29 have female founders or co-founders. As you likely know, CNote is helmed by our female co-founders, Cat and Yuliya. CNote, is in good company on this list and we’re excited to see more female entrepreneurs get the recognition they deserve. Hopefully, it will be 50/50 in the near future!

Thanks for your support!

-Team CNote

By CNote

CNote is now available to all investors!

Note that effective January 1, 2019, the rate on all CNote accounts has increased to 2.75%

CNote is proud to announce that, as of today, we are launching our impact investing product to all investors!

This means everyone can now enjoy a 2.5% return on their cash while driving prosperity in financially underserved communities across America.  

Previously, CNote was only available to accredited investors. Since our goal is to increase financial inclusion in this country, being limited to the wealthiest investors was never going to cut it for us.

After months of working with the Securities and Exchange Commission (SEC) and our dedicated legal team, we are delighted to announce that we have been qualified by the SEC to offer our product to everyone! You can review our offering circular to learn more about CNote, and the innovative financial product we have brought to market.

For current account holders, nothing will change. We’re grateful you’ve been with us from the beginning, and you’ll still receive the same great return with a positive social impact.

For the list of non-accredited investors waiting to earn 2.5%, we are excited to welcome you with open arms! You should expect an email shortly explaining how you can transfer funds and start earning money.  We know some of you have been waiting for quite a while, we are excited to welcome you to the CNote family. 

If you are not familiar with CNote, you should visit our FAQs along with our Risk & Return section to get a better idea of our product and whether it is the right fit for your investment needs.

 

For those wanting to learn more, this video explains CNote in 60 seconds.

We’ve made opening an account extremely easy, CLICK HERE and start earning 2.5% in minutes.

Our full press release is available below (pdf).

CNote Launches to Turn Americans’ Savings into Democratized Impact Investments

By parking your extra cash with this  fintech startup you can earn 40X more money while driving economic opportunity across the United States.

September 27, 2017 // Oakland, CA //  CNote, which offers up to 40x the return of a typical savings account, is announcing the public launch of its impact-focused financial platform. Previously in a testing a period with accredited investors, who collectively committed more than $9 million in savings, the Oakland-based startup is now open to everyday savers and non-accredited investors with no minimum deposit required. The startup’s flagship product has made history as the first high-yield impact product to be qualified by the Securities Exchange Commission (SEC) for mass market.

Functioning as a high-yield savings product, CNote pools deposits from multiple savers and invests it in highly-impactful, but largely unknown, Community Development Financial Institutions (CDFI). CDFIs are U.S. Treasury certified, and exist to help finance and support underserved populations like women and minority business owners.

CNote provides a 2.5% return to savers, a stark contrast to the 0.1% – or less – that most savers receive from traditional banks.

Founders Catherine Berman and Yuliya Tarasava built CNote out of a desire to help savers do good and do well.  The result of their collaboration is the first savings product to deliver outsized returns and positive social impact.

In December, the team ran a successful test with accredited investors, with over $9 million in committed savings under Reg D. In March, the company was selected as Best Startup Pitch Company at SXSW, as well as the Fintech Category Winner.

As the first platform of its kind, CNote is launching to the general public today with a cohort of  CDFI partners, including CDC Small Business and Excelsior Growth Fund. They each provide a range of services and financing options for business owners who are often ignored or underserved by traditional financial institutions.

“There’s an estimated $300B of cash that just sits on the sidelines collecting dust in our savings accounts. There’s no reason we can’t unlock it for good by putting that money to work in our communities, while driving better returns for you,” Catherine Berman, CEO and Co-Founder of CNote said. “We could not be more thrilled to open our platform to everyday consumers and smart savers, and we hope people will see this as an opportunity to think outside the bank.”

This product is the first of CNote’s suite of competitive-yield, high-impact products that seek to redesign finance with a focus on financial inclusion and empowerment.

Interested CNote users can learn more about the platform at www.mycnote.com.

###

About CNote

Founded in 2016 by Catherine Berman and Yuliya Tarasava, CNote is a financial platform for socially-conscious savers and investors. The company’s flagship product offers a 2.5% return on savings — and 100% social impact — by tapping into Community Development Financial Institutions (CDFIs), which exist to help finance underserved small business owners. In September 2017, CNote became the first competitive-yield financial product to be federally recognized and available to the mass market with no minimum and no fees.

In March 2017, CNote was selected as Fintech Category Winner at South by Southwest. The venture-backed fintech company currently operates with a team of 8 out of Oakland, California.

By CNote

CNote Non-Accredited Investor Launch Press Release

Note that effective January 1, 2019, the rate on all CNote accounts has increased to 2.75%

 

For immediate release (pdf).

CNote Launches to Turn Americans’ Savings into Democratized Impact Investments

By parking your extra cash with this  fintech startup you can earn 40X more money while driving economic opportunity across the United States.

September 27, 2017 // Oakland, CA //  CNote, which offers up to 40x the return of a typical savings account, is announcing the public launch of its impact-focused financial platform. Previously in a testing a period with accredited investors, who collectively committed more than $9 million in savings, the Oakland-based startup is now open to everyday savers and non-accredited investors with no minimum deposit required. The startup’s flagship product has made history as the first high-yield impact product to be qualified by the Securities Exchange Commission (SEC) for mass market.

Functioning as a high-yield savings product, CNote pools deposits from multiple savers and invests it in highly-impactful, but largely unknown, Community Development Financial Institutions (CDFI). CDFIs are U.S. Treasury certified, and exist to help finance and support underserved populations like women and minority business owners.

CNote provides a 2.5% return to savers, a stark contrast to the 0.1% – or less – that most savers receive from traditional banks.

Founders Catherine Berman and Yuliya Tarasava built CNote out of a desire to help savers do good and do well.  The result of their collaboration is the first savings product to deliver outsized returns and positive social impact.

In December, the team ran a successful test with accredited investors, with over $9 million in committed savings under Reg D. In March, the company was selected as Best Startup Pitch Company at SXSW, as well as the Fintech Category Winner.

As the first platform of its kind, CNote is launching to the general public today with a cohort of  CDFI partners, including CDC Small Business and Excelsior Growth Fund. They each provide a range of services and financing options for business owners who are often ignored or underserved by traditional financial institutions.

“There’s an estimated $300B of cash that just sits on the sidelines collecting dust in our savings accounts. There’s no reason we can’t unlock it for good by putting that money to work in our communities, while driving better returns for you,” Catherine Berman, CEO and Co-Founder of CNote said. “We could not be more thrilled to open our platform to everyday consumers and smart savers, and we hope people will see this as an opportunity to think outside the bank.”

This product is the first of CNote’s suite of competitive-yield, high-impact products that seek to redesign finance with a focus on financial inclusion and empowerment.

Interested CNote users can learn more about the platform at www.mycnote.com.

###

About CNote

Founded in 2016 by Catherine Berman and Yuliya Tarasava, CNote is a financial platform for socially-conscious savers and investors. The company’s flagship product offers a 2.5% return on savings — and 100% social impact — by tapping into Community Development Financial Institutions (CDFIs), which exist to help finance underserved small business owners. In September 2017, CNote became the first competitive-yield financial product to be federally recognized and available to the mass market with no minimum and no fees.

In March 2017, CNote was selected as Fintech Category Winner at South by Southwest. The venture-backed fintech company currently operates with a team of 8 out of Oakland, California.

By CNote

CNote explained in 60 seconds

Note that effective January 1, 2019, the rate on all CNote accounts has increased to 2.75%

If you are new to CNote you may have some questions. How do you pay 2.5%? How safe is CNote? Where does my money go?

The video below should help answer most of these questions in only 60 seconds.

If you still want to learn more, you may want to visit our FAQ or our Risk & Return Page.

 

Transcript of the video:

So you may be wondering, how does CNote earn you 2.5% on your savings when your bank pays you next to nothing?

Unlike banks, CNote doesn’t use your savings to fund credit cards or mortgages. We lend your deposits out to US-Treasury-certified community lenders that have more than 20 years of proven financial performance. 

These community lenders build our schools, fund our community centers and invest in the women and minority-led businesses that keep our communities thriving.

Until now, access to these high performing community lenders was only readily available to large banks and foundations. CNote’s proprietary technology gives every-day investors like you access to these investments.

Also, unlike banks, we return the profit earned on these loans back to you instead of keeping it to pay big bonuses and excessive overhead. We never charge you any fees, and the 2.5% goes straight into your pocket.

Welcome to a world of finance driven by good, not greed.

Welcome to CNote.

By CNote

CNote Social Impact Infographic

A lot of potential customers want to understand how CNote generates great returns along with helping financially-underserved communities across the United States. This simple infographic helps explain CNote’s model for generating a positive social impact.

By CNote

CNote – How it works video

Note that effective January 1, 2019, the rate on all CNote accounts has increased to 2.75%

This video explains how CNote is able to deliver a higher return on your savings while driving prosperity in communities across the United States. It highlights the institutions we invest in, their proven financial track record, and the tangible impact that they have.

Finance shouldn’t be complex or hard to understand. This video should help answer some of the questions you may have about CNote.

Earn more. Do good. Feel great.

 

If you still want to learn more, you may want to visit our FAQ or our Risk & Return Page.

 

By CNote

What drives CNote — A look back

In the startup world, six months can feel like a lifetime.

Indeed, its been about six months since CNote won the Fintech Category and took home Best Startup Pitch Company at SXSW. A lot has changed, our team has grown, but the most important things have stayed the same.

Same mission, prettier website

Despite growing as a company since March, our focus and core goals of offering a better return with tangible social impact have not changed.

In the future, the fashion might change, and the video cameras might get better, but we believe this pitch, delivered by co-founder Cat Berman, will reflect our core principles for years to come. That is why we decided to share it again as a reminder to our community, employees, and customers about the goal we are working towards. We are working to make finance more inclusive; where great returns are not reserved for the wealthy few. We are also crazy enough to think that you can get a great return while bringing prosperity to financially underserved communities and individuals across the country. 

The pitch

Hi, my name is Cat Berman, co-founder of CNote. Before I started CNote I was Managing Director at Charles Schwab and there I stumbled on this shocking finding, American’s are sitting on 300 billion dollars in just in case cash, not emergency fund cash but literally just in case cash. These are dollars sitting in our checking and savings accounts making nearly zero percent. What’s worse, we’re actually losing money, you see savings accounts don’t keep up with the rate of inflation anymore so you and I are losing about one percent of our nest egg, simply by leaving it in the bank, until now.

CNote delivers a return on your savings, two and a half percent, that’s 40 times better than traditional banks with 100% impact. We do it by working with a little known, but highly successful, financial tool called CDFIs. CDFIs aren’t new, they’ve been around for 20 years, they’re certified by the treasury department and nearly every major US bank uses CDFIs. What’s more, is every dollar invested in CDFIs goes to under-severed communities like women and minorities. CNote is the first and only company to unlock CDFI return and impact for every day savers.

How’d we do it, by creating a proprietary technology to optimize our savings across CDFIs. The team includes my co-founder Yuliya Tarasava, she ran a 10 billion dollar risk management function, Nikhil Desai our VP of Engineering was Senior Developer at Lending Club and this will be my 3rd start up. My last start up, Global Brigades is now in 5 countries. Last summer we launched our beta and to date we have over 7 million in savings on our platform. We’re excited for this year where we’ll be rolling out to potential 8 million customers with our 1st channel of distribution partner and donor advised fund. The average CNote saver starts by making 10 dollars a year on their savings account and with CNote ends up making over 500 dollars a year, just by signing up in 3 minutes.

You work hard for your savings, it’s time your savings will work hard for you.

Earn more with good karma. Welcome to CNote.

Click below to watch.

We’ve got a lot of new and exciting things on the horizon. We look forward to sharing more of our story with you here.

Join us, as we work to make finance more inclusive.

-Team CNote