- Treasury has not yet issued a term sheet that would allow for participation by S-Corporations. The current term sheet provides for the issuance of preferred stock to Treasury. However, it is expected that a term sheet for S-Corporations will be issued.
- For example, an institution's regulator determines that it needs additional capital equal to 4% of its risk-weighted assets to be considered "viable." If the institution can raise private capital equal to 2% of its risk-weighted assets, then Treasury will match it with CDCI funding equal to 2% of its risk-weighted assets and it would then be deemed viable. If the institution wanted to fully max out its available CDCI funding (i.e. the full 5% of its risk-weighted assets) it would need to match such amount dollar-for-dollar with additional private equity (thus, in this example, it would need to raise additional private capital equal to 3% of its risk-weighted assets to access the remaining CDCI funding).
CDFI Certification Criteria
In order to be certified as a CDFI, an institution must file a certification application with Treasury and satisfy the following six criteria: (i) have a primary mission of promoting community development, (ii) be a financing entity, (iii) primarily serve one or more target markets, (iv) provide development services in conjunction with its financing activities, (v) maintain accountability to its defined target market, and (vi) be a non-government entity.
For most financial institutions, the most important requirement is that it "primarily serve one or more target markets." An applicant must demonstrate that it serves an eligible target market and that at least 60% of its activities are directed towards that target market. An institution may elect to serve more than one target market in order to achieve the 60% requirement. It can serve the target market directly (such as by making loans to residents) or through borrowers that provide significant benefits to its residents (such as loans to businesses that serve the target market).
A target market may consist of one or more of the following: (i) an investment area, (ii) a low-income targeted population, or (iii) another targeted population, as each term is defined below.
- Investment Area
An Investment Area is a geographic unit (state, county, census tract, etc.) or contiguous geographic units that meet at least one of the following criteria:- Has a population poverty rate of at least 20%.
- Has an unemployment rate at least 1.5 times the national average.
- For a metropolitan area, has a median family income at or below 80% of the greater of either the metropolitan area's or national metropolitan median family income.
- For a non-metropolitan area, has a median family income at or below 80% of the greater of either the statewide or national non-metropolitan median family income.
- In counties located outside of a metropolitan area, the county population loss during the period between the most recent decennial census and the previous decennial census is at least 10%.
- In counties located outside of a metropolitan area, the county net migration loss during the 5-year period preceding the most recent decennial census is at least 5%.
- Is wholly located within an Empowerment Zone or Enterprise Community.
- African Americans
- Asian Americans
- Hispanics
- Native Americans
