Access to affordable capital has been an ongoing challenge for the Native CDFI industry. Over the past couple of years, First Nations Oweesta Corporation has been working diligently to address this challenge by developing a capital pool that will allow us to leverage both our strength and the strength of the industry to harness larger amounts of capital. Through research and outreach across the Native CDFI industry, including working with a Steering Committee of Native CDFIs and interviews with funders, investors, experts, and key partners, we have developed a model for a unique Pilot Native CDFI Capital Pool. This pool is intended to leverage larger amounts of lending capital for Native CDFIs.
The pool will be uniquely structured, relying on a membership-based model. Native CDFI members will invest 5% of their overall loan request into the pool as a cash reserve. Members will then receive up to $1,000,000 in capital. The pilot capital pool would offer members a choice from one of two financing products: (1) a low-interest loan or (2) a higher-interest loan with 10% grant combination. Loans would carry a targeted 10-year term with an interest-only period (most likely two to three years), then amortize over the remaining term of the loan.
We are currently underwriting Native CDFIs for Capital Pool membership and they must meet the following criteria:
- Be a certified Native CDFI;
- Have been lending for approximately three years;
- Have at least 2 years of audited financials; and
- Meet additional underwriting requirements.
We are also evaluating the financial strength of the Native CDFI, the Native CDFI’s ability to take on additional debt (as indicated by net asset and other leverage ratios), and the Native CDFI’s ability to deploy the requested capital amount within one year (as indicated by current pipeline, past deployment, and loan volume growth).