Assessing the Value of Small Business Loan Programs and Loan Sales: Tools to Guide CDFI Decision-Making

by Brett Simmons, Scale Link

With support from Joyce Klein, Business Ownership Initiative, and Jonathan Brereton, Scale Link

The purpose of this tool is to guide CDFIs—and also potential funders—through the process of analyzing new lending programs. These programs can take a variety of forms: guarantee, capital access, or participation programs offered through the State or Tribal Small Business Credit Initiative or the Small Business Administration; privately sponsored “originate-to-sell” programs in which CDFIs can make loans to be sold to a special purpose vehicle or a fund owned by another entity; or programs focused on a specific target population or purpose (such as a disaster relief program), in which the funder sets some or all of the product parameters.

This resource focuses on the four basic factors to be considered in assessing a program’s strategic and financial impact on the CDFI. With some initial assumptions about those factors, this tool helps a CDFI to assess the pros and cons of a program relative to these four key factors. By looking at how these pros and cons come together, this guide then points the user to the next set of questions or level of financial analysis needed for making a decision. This document is accompanied by a financial model to help a CDFI go deeper into a program’s implications.?

Read the full paper here.

Download the tool.