TACOMA, Wash.–With new discussion in Congress over potentially making up to $1 billion in funding available to community development financial institutions (CDFIs), credit unions that aren’t yet CDFI-certified are being urged to get going.
During a webinar hosted by Callahan & Associates, Mike Beall, chief strategy and advocacy officer, and Ronaldo Hardy, chief diversity and inclusion officer, both with CU Strategic Planning, said the coronavirus pandemic has put a new priority on becoming CDFI-certified, as growing bottom line pressures are going to be a strain on capital and loan-loss provisions that outside funding can help alleviate.
And it isn’t just about the credit union, said Hardy, noting the months and year ahead are going to mean CUs facing members who are also dealing with “financial ruin” due to job losses.
Beall noted current congressional funding for the Treasury Department’s CDFI Fund is at a “high water mark” of $260 million in 2020, and any increase to $1 billion would be “pretty amazing.”
Should Congress OK the additional funds as part of any new stimulus, Beall said CU Strategic Planning expects Treasury will hold a second round of applications this year for the program. But not every CDFI would qualify to apply, he cautioned.
Move Now
“Get certified now,” he urged. “You can’t apply unless you’re certified. Two, get your grant writing ready. We are already working on the submissions for next year in the event this supplemental funding comes to be.”
Hardy said the company estimates 75% of all CUs can meet the qualifications necessary to qualify as a CDFI, and reminded NCUA has streamlined the application process. “But not for every credit union,” he said. “It’s likely a credit union would not be done in time for a supplemental round, if there is one.”
Hardy said CU Strategic Planning has the capacity to help credit unions get qualified, but the process can take up to 90 days.
“The current rule is a credit union must be certified before a Notice of Funding is announced in the Federal Register and before you can access funds,” Hardy said.
He said CUs should seek CDFI certification as soon as possible before any supplemental round and should further request to be included in any eligible pool of CDFIs.
Two Types of Grants
For those not familiar with CDFI grants, Hardy outlined the two types available:
- Financial Assistance Grants of up to $1 million, which are based on the merit of a “Comprehensive Business Plan.” Credit unions can use those funds to, among other things, bolster their loss provisions or strengthen capital.
- Technical Assistance Grants, which are capped at $125,000 for small credit unions to build capacity.
Beall said CU Strategic Planning, which writes more successful CDFI grants than any other company serving credit unions, has seen credit unions use the funds to expand consumer loans, offer small-dollar loans, build homeownership programs, support actual living expense programs that may be helping people with first/last rent, create anti-eviction programs, unique first-time homebuyer programs, and small business lending programs. In the near future he expects the latter to be especially popular.
“Credit unions have had to throw away their (2020) strategic plans,” said Beall. “If you have shovel ready, unique plans, those are the ones we love to work with.”
Beall added a credit union can apply for more than one CDFI funding grant, and the company encourages them to do so.
What CEOs Should Be Thinking About
As the coronavirus pandemic continues, Hardy said credit union CEOs should now be thinking about:
- Communication strategy. “I know many of us are a little bit worn out on how much communication there is around COVID, so fine-tuning your message is imperative if you want your community to hear your message.”
- Product design and viability. “There are some products during this time period that might have to be retired or put aside, and some other that need some things added.”
- Policy review. “You’d be surprised how many things you need to do that you cannot do because policies don’t allow for it. So, go through your policies and look for those that are barriers, especially in your loan policies.”
- Organizational strategy for the next three years. “It’s probably time to go back and re-do that. Some credit unions have had to go back and do a full rewrite to take into account full implication of this. I do think it’s going to be a multi-year impact. What if we go through this situation later this year or next year?”