As a mission-driven developer, organization, or business looking into community development projects, you may be coming across language that might sound confusing and be challenging to understand. What is a CDFI? What is NMTC? What is LTV?
At Capital Impact Partners specifically, we offer flexible and affordable financing to a broad range of community development projects that deliver social impact, including community health centers, public charter schools, small businesses, cooperatives, healthy food retailers, affordable housing developments, and dignified aging facilities.
This glossary aims to demystify terms to help you navigate through our lending and programmatic services and offerings. Below you will find definitions of terms divided into the following thematic sections:
Community Development Financial Institutions (CDFIs)
Community Development Financial Institutions (CDFIs) are mission-driven private sector financial institutions that focus on serving people living with low incomes and people who have historically been locked out of the financial system. Their work entails providing lending for small businesses and community projects, affordable housing, and essential community services in the United States.
As a CDFI, Capital Impact Partners has delivered community facility financing, capacity-building programs, and impact investing opportunities to champion key issues of equity and social and economic justice since 1982.
Community Development
Community development activities tackle underestimated populations that do not have equitable access to affordable housing, health care, healthy food, and education, nor connections to capital, entrepreneurship, and quality jobs, to help them become stronger and more resilient.
At Capital Impact Partners, and together with the Momentus Capital branded family of organizations, we offer a continuum of capital products and services to transform how capital and investments flow into underestimated communities and drive community-led solutions that support economic mobility and wealth creation.
Lending Process
Capital Stack
Debt coverage ratio (DCR) is a measurement of a firm’s available cash flow to pay current debt obligations. While a DCR of 1.25 is the minimum requirement for most lenders, a higher number — such as 2 — shows lenders you are financially stable and can repay your debts. A higher DCR can also mean a potentially lower interest rate as lenders see you as less of a risk for defaulting on your loan.
Loan Term
The term of a loan is the period of time a borrower has to repay the loan. This choice affects their monthly principal and interest payment, their interest rate, and how much interest they will pay over the life of the loan.
A term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment. The term sheet serves as a template and basis for more detailed, legally binding documents. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is drawn up.
Underwriting
Underwriting is the process of your lender verifying your income, assets, debt, credit, and property details to issue final approval on your loan application.
Loan Types
Predevelopment Loan
A predevelopment loan serves as a critical lifeline during the earliest stages of a development project. It specifically targets the upfront costs associated with project planning and preparation, enabling developers to refine their visions and align them with the needs and aspirations of the communities they aim to serve. This loan bridges the gap between concept and execution, ensuring a solid foundation for success.
Real Estate Acquisition Loan
A real estate acquisition loan is a type of loan that is used to purchase real estate. This type of loan is often used by community developers to acquire existing property or development land that they plan to preserve or redevelop for affordable housing, commercial development, or other community-benefit purposes.
Construction Loan
A construction loan is a short-term loan that propels your development project from the drawing board to a physical structure. It provides the necessary funding to cover the costs associated with building, renovating, or expanding community assets. Construction loans may also cover the costs of buying land, drafting plans, taking out permits and paying for labor and materials. Construction loans typically have higher interest rates than other types of loans because lenders are taking on more risk by financing the construction of a new property.
Business Acquisition Loan
A business acquisition loan is a financial instrument designed to provide funding for individuals or businesses to purchase an existing business. These loans are often sought by entrepreneurs looking to expand their business portfolio, individuals seeking to become business owners, or existing business owners interested in diversifying their operations by acquiring complementary businesses. In the case of community developers, the specific goal would be to further community development initiatives.
Loan Refinancing
A refinance refers to the process of revising and replacing the terms of an existing credit agreement. Borrowers usually choose to refinance a loan seeking to make favorable changes to their interest rate, payment schedules, or other terms outlined in their contract. If approved, the borrower gets a new contract that takes the place of the original agreement.
New Market Tax Credit (NMTC) Qualified Low-Income Community Investment (QLICI) Loan
The capital that a community development entity provides to a qualifying project is known as a Qualified Low-Income Community Investment (QLICI) and it is a seven-year, interest-only loan.
Health Care
Integrated Care
Integrated care is a unique approach to health care that is characterized by close collaboration and communication between multiple doctors and healthcare professionals. In other words, it is a type of healthcare where all of your doctors work together to solve issues with your physical, mental, and behavioral health. At Capital Impact, we support the Integrated Care model because it improves the quality of care, promotes better health and lower costs while creating thousands of jobs, spurring economic development.
PACE (Program of All-inclusive Care for the Elderly)
Area Median Income is the income for the median household in a given region. If you were to line up each household from poorest to wealthiest, the household in the very middle would be considered the median.
Tenant Opportunity to Purchase Act (TOPA)
TOPA, or “Tenant Opportunity to Purchase Act”, is a type of anti-displacement housing policy that gives tenants options to have secure housing when the property they rent goes up for sale, while also preserving affordable housing.
Cooperatives
Food Co-ops
A food co-op is a grocery store that is totally independent and owned by the community members who shop there. An illustrative example is ChiFresh Kitchen, a food co-op owned by justice-involved Chicagoans, primarily Black women. ChiFresh won a Co-op Innovation Award and was not only able to continue its expansion, but also pivot to provide freshly cooked and culturally appropriate foods to those impacted by COVID-19.
Housing Co-ops
A housing co-op provides an alternative to the traditional methods of acquiring a primary residence. It is a type of residential housing option that is actually a corporation whereby the owners do not own their units outright. Instead, each resident is a shareholder in the corporation based in part on the relative size of the unit that they live in. Capital Impact Partners has helped ROC USA, a nonprofit that helps residents form cooperative corporations to purchase their manufactured home communities from private owners and manage their neighborhoods in perpetuity. They have gone on to become a powerhouse in this area, helping thousands of residents become homeowners and community stewards.
Worker Co-ops
Worker cooperatives are values-driven businesses that are owned and operated by their employees. Capital Impact has made a $1 million preferred equity investment in Obran Cooperative, a unique company that operates a number of worker-owned healthcare companies.
Worker Co-op Conversions
Worker co-op conversions – or employee ownership conversions – occur when businesses transition from a traditional ownership structure to employee ownership. Essentially, the business owner sells the business to the employees. These conversions (PDF) can drive company productivity while rewarding the people who are contributing to the company’s success, as well as helping to preserve the company’s mission and values.
In 2021, Capital Impact Partners financed the worker co-op conversion of Ward Lumber. This new cooperative is another example of the power of worker co-op conversion to maintain and increase wealth and stability within communities.
2022 is a special year for us at Capital Impact Partners as it marks our 40th anniversary. Four decades of leaning into helping people build communities of opportunity and developing pathways to success.
And while this is an exciting time for us as we embark on a new strategy under Momentus Capital, it is equally important to remember our roots as a champion for the cooperative movement.
Oakland, Ca. is a vibrant place, a reflection of the multicultural communities within its borders. However, Oakland also experiences poverty, limited social services, and crime, which hold its communities back – particularly communities of color – from achieving their full potential.
Over the past several years, Oakland has seen an influx of residents as the demand for housing in the San Francisco Bay area has driven many people there, on top of the residents who already called the city home.
Fruitvale Transit Village is a vibrant hub within Oakland, providing community development and a neighborhood center based on economic development and transportation.
In the early 2000s, Unity Council, based in Oakland, made a bold gamble: create a transit-oriented development that co-located housing, commercial development, and community space in the city’s Fruitvale neighborhood. Why? To expand access and opportunity through employment and transportation, while also creating ownership and small business opportunities to foster wealth creation.
Realizing that such an undertaking could not be done in a vacuum, the Fruitvale Transit Village brought together community members, stakeholders, government officials, and nonprofit and civic organizations to come up with a plan that would enhance local assets and help the neighborhoods build wealth and power.
The result: neighborhood transformation that centered the needs of the residents by providing easy access to social services, education, retail, and more. It is so popular that it quickly became the fourth busiest stop on the Bay Area’s subway system and a generator of wealth and community assets through local businesses and job creation.
Capital Impact Partners is proud to have partnered with Unity Council to support this community-centered development, as well as specific community partners within the development, such as La Clinica de la Raza. This type of collocation investment fits right in with our focus on holistic, community-centered development that community members value, as well as our commitment to financing for racial equity.
In this Q&A, Unity Council’s Director of Development and Communications Dana Kleinhesselink and Director of Real Estate Development Aubra Levine talk about the community will and economic investment that made this innovative project possible, and why they feel this model is invaluable for other communities and developers across the country.
Q: What is the history of the Fruitvale community in Oakland?
Dana: Fruitvale is really the hub and heart of the Latino community in Oakland. We are the largest Oakland neighborhood with this high concentration of Latinos, from Mexico, Central America, South America. It is a really diverse Latino experience. This community is very heavily immigrant, and that is true for its identity for 50 years or so. So, about 50 percent of the people who live in Fruitvale are Latino. Another 20 percent or so are Asian, and many of those people are immigrants as well, who speak diverse languages, and another 15 percent are African American.
Q: What kind of investment or disinvestment has there been in this neighborhood?
Dana: Fruitvale was a redlined neighborhood. There was a deliberate lack of investment here from the 1950s and 1960s. There were no traditional banks or lending products. Home ownership development was not really a focus here. There was explicit institutional racism that kept a lot of the people of color in generational poverty. And that is systematic, through financial institutions and the school district, as well as city government. Unfortunately, there is crime in the area, which has been the main news story and really has overshadowed the positive things that this community brings.
Q: What was the genesis of Fruitvale Transit Village? How did the transit-oriented part come about?
Dana: In the 1990s, Bay Area Rapid Transit (BART) revealed a plan to create a four-story parking garage right in the middle of what is now the Village. Fruitvale had a bad reputation, there was crime and poverty, and the idea was to make a seamless transition for riders from their vehicle to BART, without interacting with the community. Our neighbors and our founder saw that as really problematic and they started countering the narrative, because our community is a BART rider as well. Our community deserves to have a seamless experience from their home to BART.
So, the community started organizing to say, “okay, why don’t we find a better way, and let’s bring BART in as a partner.” And that is what we did. Now we have a strong relationship, and I think Fruitvale is the fourth busiest station in the system. The amount of revenue generated by riders there, and the amount of revenue generated in the community because BART is so accessible, is really unquantifiable.
Q: What community needs does this development address?
Dana: Unity Council was looking for ways to stabilize the Fruitvale neighborhood by owning and controlling real estate. We had done a few real estate development projects already. And the idea – to quote our founder, Arabella Martinez – was, “In order to have wealth in this neighborhood, the community must own and control the assets.” We conducted broad outreach over a long period of time to make sure that what we were proposing was actually consistent with community needs.
We were committed to lifting up local businesses instead of installing a whole bunch of big box stores and national chains; we made sure that community services were a key feature. The Village includes a high school, a library, a health clinic, an early childhood development center, and a senior center. Most of the commercial square footage in the Village is actually community serving. It was never really intended to be a cash cow. It was intended to be a place for the community. Additionally, we know that community ownership leads to stability or can prevent displacement. Unity Council wanted to bring community members to the table and create ways for the community to engage in economic growth through ownership.
In order to have wealth in this neighborhood, the community must own and control the assets.
Arabella Martinez, Unity Council founder
Q: This project provides multiple services in a central location. Why is that valuable?
Dana: It’s incredibly important to have a hub of services, and we’ve actually incorporated this into our five-year strategic plan, under a strategy we call “Neighborhood Hub Approach.” In the growing body of research regarding the social determinants of health, there is wide recognition that a broad range of social, economic, and environmental factors shape individual and community health outcomes. The Unity Council defines a “healthy neighborhood hub” as a place where people live healthy lives, feel safe, have a sense of belonging, are able to – and want to – stay in their neighborhood, and where they can access supportive services.
The cluster of services accomplishes two practical functions:
it draws in a wide range of people to visit for a diversity of reasons.
There are reasons for children under five, commuters, low-income seniors, and high school students to all come to the Transit Village, which provides a solid consumer base for the community organizations and businesses located there. It provides a sense of vibrancy all day and evening long. People come to shop and eat at the restaurants, but they may also be coming to go to their local health care provider or visit a resident that lives in an apartment on-site; and
co-locating services lowers the barriers to access to those services for people most in need.
Many of the programs and services at the Fruitvale Transit Village are targeted to low-income immigrant families. It is almost a “one-stop shop” approach for many of these families who may receive child development services from the Head Start facility, health care from La Clinica de la Raza, and legal support from Centro Legal de la Raza, all in one location.
Q: Why Fruitvale? What made this location/community right for this development?
Dana: Fruitvale has a rich history of political activism and organizing and really doing for ourselves what others will not do for us. This community tries to find ways to build capacity within our own people, which has created so many opportunities today. The Fruitvale Transit Village is just an incredible economic engine.
We see many small business owners using community lending products like Kiva loans and nontraditional financial products that help because they have been excluded from traditional financial products. We see a lot of cooperative businesses here as well. We have found that the Fruitvale Transit Village, by being this anchor development, and with Unity Council working with so many partners locally, has really helped to curb displacement in this area.
UCLA launched its Latino Policy & Politics Initiative, and they conducted a 10-year longitudinal study on Fruitvale Transit Village’s effectiveness, in terms of improving educational outcomes, increasing financial wealth for families in the neighborhood, and small business development. It showed that the racial and ethnic makeup in the neighborhood, as well as the age diversity, has really stayed the same over 10 years, while rates of home ownership, rates of small business ownership, and rates of educational attainment have all increased.
Q: Fruitvale Village is unique, being a mixed-use, transit-oriented development. Did you experience any difficulty in finding a lender for this project?
Aubra: We did have a bit of difficulty in finding a lender. The feedback that we received was really in that it comprises commercial uses, residential uses, and community facilities. A lot of the lenders that we reached out to were really interested in supporting our mission, but did not understand how to underwrite those three things together. They could not quite wrap their heads around the mixed-use components.
We are very mission-aligned with Community Development Financial Institutions, and we have developed relationships with larger banks as well. There is a lot of support for the work that we do.
It was really wonderful to work with Capital Impact Partners because you got it right away. Capital Impact is local, and understood the project in a very literal way, having stood there. It was really wonderful to be able to find that in a lender.
It was really wonderful to work with Capital Impact Partners because you got it right away. Capital Impact is local, and understood the project in a very literal way, having stood there. It was really wonderful to be able to find that in a lender.
Aubra
Q: What tools did Capital Impact provide that made the process work?
Aubra: Capital Impact Partners, from the start, was willing to be collaborative. The commitment to making it work, to saying yes, to finding the “where there’s a will, there’s a way” mentality was crucial to making the transaction happen. The team that we engaged with on a day-to-day basis was really well organized and on top of the underwriting. They made the process feel seamless, especially as they were coordinating with the co-lender on this refinance, LISC.
Additionally, through the Bond Guarantee Program, Capital Impact was able to provide more competitive terms than other lenders that we reached out to.
Combining transit orientation with vital social services like health care, education, and affordable housing creates Unity Council’s vision of a “healthy neighborhood hub.”
Aubra: Our mission as an organization is to build social equity. It is to reduce poverty and disrupt cycles of poverty that are generational. What we know is that to attack poverty head on, you cannot do it in a piecemeal manner. You cannot just look at education or home ownership or workforce development or career development. You really need to work holistically and weave them together and provide a safety net that is truly integrated.
That multifaceted, easily-accessible, integrated approach to promoting social equity is probably the most labor intensive way to do it, but I think it is the most effective, our neighborhood hub approach.
Equally, it was important that this community was already an existing transit hub. I do not think the Transit Village would have worked as well if we just decided to form a hub around a random bus stop.
Q: What would your advice be to other organizations looking to build similar projects in their community?
Aubra: I think that Unity Council paved the way and made it a little bit easier for community organizations, for funders, to learn from our path and see that this is possible in their community, there is return on this investment, and that is the right thing to do. I definitely think it is possible, and I recommend it.
Dana: Have a bold vision, be collaborative, work with the right partners, and engage community stakeholders for their input to make sure it is consistent with community needs.
Contact us today to start a conversation about how Momentus Capital can support your journey to success.
With the COVID-19 pandemic still impacting communities across the country, particularly communities of color, the work of community health centers and clinics (CHCs) is more urgent than ever.
With thousands in communities across the country, community health centers (CHCs) seem like a long-standing part of the national health care system. However, the origins of CHCs are relatively recent, born out of civil rights struggles that started 10,000 miles away. They owe their start to Dr. Jack Geiger, who applied an idea that he had seen used to address the stark health care disparities in apartheid South Africa to the structural racism that African Americans experienced in accessing quality health care.
Boyle Heights is a bustling Latino neighborhood just east of downtown Los Angeles with a history dating back before the Mexican-American War. However, it’s the pressures of the present day that weigh heavily here. Approximately 66 percent of the population lives below 200 percent of the federal poverty level, 22 percent are uninsured, and few primary care doctors remain. The systemic poverty the residents grapple with creates ripple effects throughout their lives.
As wildfires burned through California’s Napa and Sonoma Counties in late 2017, Sandy Cesario was forced to evacuate her home and all she knew. Like many of the 5,000 residents of her small Calistoga town, she took refuge at one of the county’s evacuation centers filled with uncertainty.
That was the last place she expected to see her personal doctor.
2016 was marked by change—both for the U.S. and for Capital Impact. Our country witnessed a transition in leadership and with it words and actions that have divided our country. Part of this division included the voices of many who felt the American Dream had passed them by.
By Candace Baldwin, Director of Strategy, Aging in Community
Wouldn’t we all like to age in our homes and communities, surrounded by what is familiar, supported by a health care team that really understands who we are and how to serve us as individuals with unique needs? This kind of age-friendly health system has generally been an anomaly in the United States, particularly for low-income, older patients. Coupled with the fact that 90 percent of older adults want to age in their own homes, integrated care models are best supported at the community level.
By Katherine Groves & Daniel Ramirez, Loan Originations Team
When Tri-City Health Center (TCHC) opened in Fremont, CA in 1970, it was one of just a handful of clinics serving low-income, minority women from Fremont and the neighboring Alameda county cities of Union City and Hayward.
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