CDFI, or Community Development Finance Initiatives are local schemes available across the UK. At present there are about 60 of these scheme operating across the UK.
Many CDFIs started life as a ‘micro lender’, offering loans to lower demographic sectors, low income households or in disadvantaged areas. With the mainstream banks limiting access to finance then CDFIs have expanded to meet demand.
The story why CDFIs have grown is not unusual. Many good business owners still find raising finance difficult. Seeing a good business plan, solid idea and something well thought through fail to obtain funding from a bank is still very common. Whilst we can often find the right finance for your business, sometimes we need to cast the net wider and CDFIs can be a great option.
A CDFI is not a payday lender, it is not a straight commercial institution. A CDFI is interested in the benefit to the local community as well as the underlying business. We have seen CDFIs described as ‘an old style bank where the manager was actually based in the community and could make a decision’.
Where Are CDFIs Based?
Across the UK. If you want to find your local CDFI then see ‘Finding Finance‘, it is an independent site that will point you in the right direction.
All CDFIs are regulated by the CDFA – Community Development Finance Association, take a look at the site as it gives you a wider picture of what is happening.
CDFIs funded over 10,000 UK businesses last year alone. They are not for everyone but they could be the right option for you, find out more then make your mind up.
How Easy Is It To Borrow From a CDFI?
Let’s be straight. If your business idea does not stack up then it won’t get funded, your business proposal needs to be properly thought through. This does not mean that everything needs to be perfect, far from it, however you do need to have done some homework on what you are doing.
If you can borrow from a mainstream lender then you won’t need a CDFI as they will not compete with banks for their business. The role of the CDFI is to support the ‘right’ applicants and make the decision that benefits the local community.
Where Do I Find Out More About CDFI?
By Dave Farmer
Dave Farmer is founder of the award winning Lime Consultancy, a business finance advisory based in Sussex.