What Are Alternative Funding Sources?

Hello my followers! I have finally reached the end of my school journey as I slowly approach graduation day. For this post, I wanted to spiel about alternative funding sources and some websites that provide these types of sources.

The first website I selected for this post is ncif.org, or the National Community Investment Fund. It is a non-profit, private equity trust that invests in thrifts, banks and credit unions that generate financial and social returns.  According to ncif.org, a Community Development Banking Institution (CDBI) is a name used by NCIF to “describe a depository with a community development focus.” They increase access to financial services to undeserved communities that wouldn’t otherwise have it. They go out and purchase common stock to these CDBI’s, make seed fund loans, extend debt to banks, and they provide secondary capital to low-income credit unions.

(ncif.org)

Some of the requirements and qualifications to obtain the financing from NCIF include that the CDBI must focus an abundant amount of its business on low-to-moderate income people or communities. It must be located in a rural, urban, or Native American market to qualify and they have to show sound, financial performance.  The website also says that NCIF has what is called the CDBI Exchange Network which allows CEO’s and CFO’s in the industry to help give advice on such things as risk management and valuation.  They also offer news and updates on NCIF.

The second website I visited is eda.gov, which stands for the U.S. Economic Development Administration. Their mission statement is: "To lead the federal economic development agenda by promoting innovation and competitiveness, preparing American regions for growth and success in the worldwide economy." Some of their financing opportunities include their Public Works and Economic Development Program and their Economic Adjustment Assistance Program (EAA). These give infrastructure assistance and help support construction and expansion of infrastructure in areas that have experienced adverse economic changes. EDA also offers technical assistance, a Community Trade Adjustment Assistance Program and more on the site.

Applicants must meet certain technical competitive merits and/or lack thereof to qualify for grants, meet quarterly funding deadlines and EDA’s priorities. Some of the requirements that an EDA-funded Comprehensive Economic Development Strategy (CED) includes having a planning organization, a strategy committee, performance measures, a list of goals and objectives, a plan of action, and beyond. The site also shows plenty of other federal funding links, tools of the trade, and research reports.

(eda.gov)

A few disadvantages of using alternative funding are high interest rates, having to offer collateral, factoring companies’ fees, and possibly giving up a substantial amount of ownership equity. One advantage is that they provide a boost in investments for women and minority-owned businesses. It can include peer-to-peer networking and asset-based lending along with government-backed loans. Microlending is beneficial for owners with little to no credit and who have no track record and provides a small amount of cash needed for them to start their small business. Community banks and credits unions are now issuing and taking on smaller business loans and these are all helping to relieve the strain on the economy. 

References:

(2011). Retrieved Sept 8 2011 from, http://www.ncif.org/index.php/about/

(2011). Retrieved Sept 8 2011 from, http://www.eda.gov/

(2011). Retrieved Sept 8 2011 from, http://smallbusiness.intuit.com/news/Expansion/growth-of-business/18887918/Alternative-Funding-Sources-for-Small-Businesses.jsp

(2011). Retrieved Sept 8 2011 from, http://online.wsj.com/article/SB124827141870672175.html