Tim opened the meeting by asking “How is your CDFI doing and what are your most pronounced challenges and needs?”
The overall answer was, “We’re doing well, loan volumes are increasing, but could really use some additional resources to grow.”
The group specifically cited the need for equity capitalization to improve leverage. “We need strong balance sheets to borrow against” was the refrain. There is also a need for funding for operations and improved technology infrastructure. There continues to be a shortage of sources for loan loss reserves, which results in fewer loans made. Well-structured debt capital, i.e. larger EQ2s, is also needed, but requires CDFIs to have more assets on their books. Foundations that could provide loan guarantees for small business lending have not stepped forward since Fresno Regional Foundation facilitated a million dollar EQ2 with Wells Fargo. Geri Yang agreed to explore this potential resource with the California Philanthropy Roundtable
The group would like better collaboration with TA providers, to increase capacity to screen for loan eligibility and coach clients through the loan process. Opportunity Fund is sponsoring a bill that would allow CDFIs to pay referral fees, which CAMEO will be promoting in the coming year.
All the CDFIs stated they work hard to create close ties to their branch loan officers, and would like to see referrals from banks institutionalized in bank operations. Although bank referrals have been an issue for a long time, only Union Bank seems to have successfully achieved this. VEDC reported that 60% of their borrowers are referred by banks and 50% of these referrals get loans.
Many referenced the potential benefits and pitfalls of the new wave of online lenders, and some have seen borrowers who need to be refinanced out of poorly-structured online debt. Online lenders are entering the micro loan space because of a gap in products. There is not enough capital for micro lending, plus borrowers are looking for faster turn-around. CAMEO plans to address this issue, and build upon the initial analysis provided by Opportunity Fund and other organizations.
Regarding the close-out of CEDLI, CDFIs expressed concern that the CEDLI capital is no longer available. Because Wells Fargo served as the agent bank for CEDLI, it was suggested that WFB work to direct the millions of dollars of ongoing loan repayments to their CDFI partners. Claudia and Marc Nemanic agreed to explore this with Tim Rios. It was generally agreed that the manner of closing out CEDLI did not reflect well on Wells.
Tim and his team agreed that as next steps they would address the themes and gaps expressed during this meeting.
The participating CDFIs were: Emily Gasner, Working Solutions; Roberto Barragan, Valley Economic Development Corporation; Kerry Doi and Namoch Sokhom, PACE; Gwyneth Galbraith, Opportunity Fund; Salam Nalia, Fresno CDFI; Debbie Raven, Valley Small Business; Debra DeBondt, Opening Doors; Marsha Bailey, Women’s Economic Ventures; Scott Lewis, OBDC; Marc Nemanic, 3Core.