Small-Business CDFI Loans: What They Are and How to Find One

Community development financial institutions (CDFIs) are bank or nonbank lending institutions that are certified to provide financial assistance and access to capital for underserved communities.
Olivia Chen
Andrew L. Wang
By Andrew L. Wang and  Olivia Chen 
Edited by Christine Aebischer

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Due to banking deserts and rigid loan qualifications, business owners in underserved communities often face unique challenges accessing capital. According to a 2023 report released by the Federal Reserve, for example, only 20% of Black-owned small businesses were approved for requested funding in 2022

Fed Small Business Report. 2023 Report on Employer Firms . Accessed Sep 18, 2023.
. Another study by the Federal Bank of Cleveland concluded that less than 6% of Paycheck Protection Program loans went to low-income-area businesses, as opposed to the over 35% that went to businesses located in upper-income areas, despite the intent to prioritize underserved areas.

Community development financial institutions (CDFIs) are bank or nonbank lending institutions that are missioned to provide resources, including loans, to underserved communities. If you’re having trouble qualifying for a small-business loan, a CDFI loan might be a good option for you.

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What is a CDFI?

A community development financial institution (CDFI) is a mission-based financial institution that provides loans, training and business assistance to communities that have trouble accessing capital through traditional lenders. CDFIs are certified through the U.S. Department of the Treasury, and represent a diverse array of lenders, including banks, credit unions, nonprofit and for-profit loan funds as well as venture capital funds.

CDFIs are funded by a combination of government and private-sector money that may draw from the U.S. Treasury Department and Department of Commerce, traditional financial institutions, religious organizations, corporations and more. This enables them to offer unique loan products that work for their target markets. It also allows them to eliminate traditional barriers to accessing capital, such as personal credit score, time in business or collateral requirements. There are more than 1,300 CDFIs in operation across the country today.

Bluevine - Line of credit
OnDeck - Online term loan
Funding Circle - Online term loan
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Small-business CDFI loans: Pros and cons


Low interest rates: Rates for CDFI loans are competitive with those you will likely find through traditional lenders, like banks. In the 2021 fiscal year for example, interest rates on CDFI loans ranged between 4% and 9% depending on the type of loan, according to a July 2023 report commissioned by the CDFI Fund

. Because they raise money from a variety of sources, CDFIs are better able to maintain stable rates even amidst recent rate hikes.

Although many CDFIs fall under the category of alternative lenders, in terms of interest rates, they should not be confused with online lenders, which are another type of alternative lender that often offer higher rates than traditional institutions.

Higher likelihood of approval: CDFIs are missioned to lend to underserved communities, including rural and urban low-income areas. That means their qualifying criteria are often more relaxed than traditional lenders. For example, Accion Opportunity Fund offers small-business financing with no minimum credit score requirement and only requires three months in business.

Business development help: CDFIs offer technical assistance and training programs to small businesses to help them get started and grow sustainably. Some offer mentoring and advisory services, and may even offer workspaces for you to use as an office or to meet with clients.


Not for everyone: To be certified by the federal government as a CDFI and be eligible to extend CDFI loans, organizations must have a primary mission to promote economic development and must serve an underserved area or population. If your business isn’t lacking resources, opportunity or access to financial services, chances are that a CDFI is not the right path for you.

Longer funding time: The application process and time to funding can take longer with CDFIs than other types of institutions. Because of their business model, CDFIs generally have fewer assets than banks, which can result in lack of updated technology and staffing shortages. If you are in need of fast funding, you likely won’t find it with a CDFI loan.

CDFI loans vs. bank loans

CDFI loans

Bank loans

Required minimum credit score

Some CDFIs do not have a minimum credit score requirement, while others may require a 600 or above.

Typically 670.

Type of lender

Can be depository – meaning they hold deposits from customers – or nondepository institutions.

Depository institutions.

Business advisory services

Often offer technical assistance and business advisory services.

Do not offer technical assistance with applications or additional business advisory services for loan customers.

Regulating entity

Depending on the type of CDFI, the regulating entity may be the FDIC, NCUA, OCC, IRS, the respective state or the institution may be self-regulated.

FDIC, Federal Reserve or OCC.

Funding source

Mixture of government and private-sector money that they have to raise to cover salaries, operations and any money loaned out.

Make the majority of their money from the deposits of their customers.

Where to find a small-business CDFI loan

To find a CDFI in your area, visit the Treasury Department’s searchable award database or the Opportunity Finance Network’s CDFI locator. If you use a larger bank, you may also check their website to see if they partner with any CDFIs. Bank of America, for example, provides a searchable list of their CDFI partners.

To apply for financing, small-business owners likely will need to provide the same kind of information they would at a bank: personal and business tax returns, personal financial statements for all business owners, lease agreements, bank statements, income statements and balance sheets.

CDFI loan alternatives

Online lenders

Online lenders, like OnDeck and Funding Circle, provide a variety of small-business financing options. The entire loan process can be conducted online, which can make it more streamlined and faster than a traditional loan. They are usually easier to qualify for than traditional loans, which make them a good alternative to CDFIs if you are having trouble qualifying. However, make sure you look for lenders that are transparent about their terms. Annual percentage rates, or the total cost of funding, for online lenders can fall anywhere between 8.99% and 99%.

SBA loans

SBA loans are partially guaranteed by the Small Business Administration and administered through a variety of different lenders, including many CDFIs. SBA products are designed to incentivize lending to underserved borrowers and offer favorable terms, rates and fees. However, they can be difficult to qualify for, and the process can be lengthy. Still, if your bank offers SBA loans, it’s worth checking with them first to see if you qualify for one.

Small-business grants

Small-business grants are another great way to finance your small business without having to take on any debt, though they can be difficult to find and qualify for. There are many government and private-sector grant programs that are dedicated to funding small businesses in underserved communities, and resource centers like your local Minority Business Development Agency center can help you find and apply for them.

Merchant cash advances

Merchant cash advances can be an alternative to small-business CDFI loans. They are a type of financing wherein an MCA company advances capital to a business in exchange for future sales revenue, plus a fee. While they can be a short-term solution to gaps in cash flow and qualifying is typically easy, they are also one of the most expensive types of business financing. Try to exhaust all other financing options before turning to an MCA.

Compare small-business loans

If your business isn't eligible for a CDFI loan, online lenders may provide an alternative. Online lenders specialize in simplifying the loan application process and in offering credit to a wider variety of businesses at competitive interest rates for strong-credit borrowers and often more quickly than banks.

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