Mill member profiles

Entrepreneurs and Innovators of The Mill: Brian Payne with CDFI Friendly Bloomington

by Nov 20, 2019

The Mill is the epicenter for coworking and entrepreneurship in Bloomington. One year in, and the momentum is exciting! Bloomington is creative, altruistic, and full of potential. We’re ready to CREATE something, as evidenced by our growing community of makers and shakers. Our space provides connection and inspiration.

Every quarter, our members gather to share their successes and learn from each other. What happens behind these walls certainly does not stay behind these walls. Rather, it flows back out into the community, making real impact. This is the first of many profiles to come of local entrepreneurs and innovators, leveraging The Mill as a launchpad for their ideas.

We loved hearing from Brian Payne, Executive Director of CDFI Friendly Bloomington, an organization launched earlier this year to address a real need in Bloomington and surrounding areas: access to flexible, affordable financing for community development. Here’s the story behind CDFI Friendly Bloomington!  

CDFI Friendly Bloomington Changes
Community Development Financing for Small Markets

by Brian Payne

The Mill is Bloomington’s center of gravity for innovators, and that now includes Bloomington’s newest nonprofit startup – CDFI Friendly Bloomington. This organization takes a novel approach to stimulating affordable, flexible investment by community development financial institutions (CDFIs) in small markets like south central Indiana. With the launch of CDFI Friendly Bloomington (CFB), Bloomington is the first-ever city to become “CDFI Friendly.” Hooray, we did something unprecedented! But, what does that mean? What are CDFIs, and why would we encourage them to serve our region?

CDFIs are private financial institutions that serve capital needs that fall outside the margins of traditional financiers. To obtain CDFI certification from the Treasury Department, CDFIs must have a primary mission of promoting community development and offer technical assistance and development services to borrowers, along with other structural requirements. Banks and credit unions are governed by financial regulations and rigid underwriting requirements that exclude loan applicants for a variety of reasons. CDFIs expand the finance market and provide funding to many applicants who cannot obtain or afford traditional financing. Bottom line: CDFIs benefit underserved populations – low-income, low-wealth, and other disadvantaged groups or distressed areas – by investing in housing, small businesses, and community facilities that have no alternative source of affordable capital.

CDFIs make tremendous contributions to the areas they serve, but what prevents CDFIs from investing in Bloomington? For starters, there are no CDFIs located in Monroe County or any adjacent county. As a federal requirement, CDFIs must establish a target area of service where they must invest the majority of their capital, and they tend to locate in larger metropolitan markets that support a large loan portfolio. Of more than 1000 CDFIs in the U.S., only a dozen or so list Indiana within their target area. Additionally, because CDFIs take on greater risk than traditional banks and provide mandatory technical assistance to their clients, their success typically depends on deep knowledge of the communities they serve. While a few CDFIs have invested in the area over the past decade, CDFI activity has been rare and sporadic in south central Indiana. Local CDFI activity begets more local CDFI activity, and Bloomington and surrounding areas are excluded from this positive feedback process.

CDFI Friendly Bloomington represents a unique, new approach to address these barriers to the longstanding problem of expanding CDFI financing access in smaller communities. A recently formed 501(c)(3) organization, CDFI Friendly Bloomington is the culmination of two years of public-private collaboration and market research to explore methods to increase and expand flexible and affordable financing options in the community. Initial seed funding for operations has been provided by the Community Foundation of Bloomington and Monroe County, the Bloomington Urban Enterprise Association, and local and regional banks.

Our mission is to match local investment opportunities with regional and national CDFIs. Any project that cannot afford or qualify for traditional financing, and that serves the public interest, could potentially be a CDFI investment opportunity. My role is to market and incentivize community development projects – affordable and workforce housing, small business growth, and new community facilities, e.g. – to the CDFI world. CDFIs are increasingly specialized and unique from each other, so this matchmaking will help local projects connect with the CDFIs best suited to their needs. Working the opposite direction, CDFI Friendly Bloomington also helps provide the community knowledge, connections, and technical assistance that allows CDFIs to succeed where other financiers do not.

In addition to coordination and technical assistance, we offer two potential financial incentives for CDFIs who invest in our region. First, we have partnered with Bank of America, the nation’s largest investor in CDFIs, to provide 0-1% financing to CDFIs to backstop loans made in our region. This affordable capital will help attract CDFIs to south central Indiana, mitigate their risk in lending outside their target market, and may improve loan terms for our local borrowers. Finally, CDFI Friendly Bloomington has an enhancement pool of our own capital that we can loan alongside CDFIs to bridge funding gaps, mitigate risk, and make community development projects a reality.

We are a nonprofit startup, testing the viability of this unprecedented model, scaling up our operations and infrastructure, and focusing on job one: closing the deals that positively impact the community (and sustain our fiscal solvency). Fortunately, CDFI Friendly Bloomington’s fiscal sponsor, the Community Foundation, has a sponsor-level membership at The Mill. Basing CDFI Friendly Bloomington in the Mill is an ideal fit: it is a central hub for the community stakeholders we serve, has built-in facilities to help our lean organization function at a high level, and provides a platform to reach entrepreneurs and small businesses. Plus, there are often valuable opportunities through Mill programming that inform my work in structuring investments, organizational management, marketing, and everything else crucial for a fledgling organization.

I began as the inaugural executive director in September, and we broke ground on our first CDFI Friendly supported project – Kinser Flats, a 50-unit affordable, supportive housing facility for families affected by substance use disorder – on October 1st. CDFI Friendly Bloomington’s success depends on being well-integrated into the community, so I hope to hear from interested Mill members soon.