This guide was created for people who are unable to attend one of the community development finance workshops sponsored by the Federal Reserve Bank of St. Louis. The hope is that users of this guide will be able to familiarize themselves with the basics of the sort of financing that is crucial today for getting needed development projects off the ground. These are the types of projects that might not be undertaken without broad community support, projects such as affordable housing or downtown revitalization.
Among those who are expected to use this guide are members of community-based organizations, development groups, state and local governments and financial institutions. The challenges they face will probably be more difficult than those that confronted their predecessors. Why? Because:
- Government aid is being shifted to reflect new priorities.
- Handouts with no strings attached—whether from a government or foundation—are going the way of the dinosaur. As subsidies decline, community development projects will rely increasingly on debt financing (loans) and equity financing (the sale of stakes in the projects).
- Investors have raised their expectations for a return, whether that return is in the form of dollars or in social benefits. And the return must be measurable—not just a "promise," a "hope" or an "expectation."
- Money will have to come from not just one source, as was often the case in the past, but multiple sources. Seven to 10 funding sources for one project is already becoming the norm. Whereas the layering of different kinds of government aid on a single project was once banned, it is now often encouraged.
Leading the charge in such an environment isn't easy, especially for those with little experience in finance or little confidence in their math skills. Not only beginners but veterans of this sort of work are finding that they are overwhelmed at first by all the options available in today's development finance industry. But the task isn't insurmountable. Your commitment to your community will take you a long way in this process. We'll help with the rest.