Capital Aggregators are vital pieces of local capital ecosystems. Capital Aggregators can be local community development financial institutions (CDFI), credit unions, community development corporations (CDC), revolving loan funds (RLF), angel or venture funds, or even local bank branches. Capital Aggregators are professional investment organizations who raise capital from various sources (like foundations, government, banks) and make investments – often by investing in affordable and workforce housing, community real estate projects, local small businesses and enterprise, and more.
- Community Development Financial Institutions (CDFIs): CDFIs are specialized financial institutions certified by the U.S. Department of the Treasury to serve low-income, underserved, and economically distressed communities. They provide access to affordable credit, capital, and financial services to populations and businesses that traditional financial institutions may overlook. CDFIs include banks, credit unions, loan funds, and venture capital funds, all of which focus on fostering community development and reducing economic inequity. They are unique because they blend social mission with financial discipline, aiming to generate measurable social impact alongside financial returns. CDFIs differ from conventional banks by targeting borrowers who might not meet the typical credit criteria and often providing technical assistance to ensure borrowers’ success. Their funding comes from a mix of federal programs, private investors, and philanthropic contributions.
- Community Development Corporations (CDCs): CDCs are nonprofit, community-based organizations focused on improving the economic, physical, and social conditions in low-income neighborhoods. Legally structured as 501(c)(3) organizations, CDCs are distinct in their mission-driven approach to revitalizing communities. They often engage in projects such as affordable housing development, workforce training, small business support, and infrastructure improvement. CDCs are unique because they are rooted in the communities they serve, often governed by a board of directors composed of local residents, business owners, and other stakeholders. Unlike CDFIs, CDCs do not necessarily provide direct financial services but instead focus on implementing and managing development projects. Many CDCs work in partnership with CDFIs or local governments to secure funding for their initiatives.
- Banks and Depository Institutions: Banks and depository institutions are financial entities authorized by regulatory agencies, such as the Federal Reserve or FDIC in the U.S., to accept deposits, make loans, and provide other financial services. They serve as the backbone of the financial system, facilitating economic activity by safeguarding savings and offering credit to consumers and businesses. What makes them unique is their dual role in serving the public (e.g., consumer banking) and acting as intermediaries in capital markets. Unlike CDFIs or CDCs, traditional banks often prioritize profit over social impact and may not focus on underserved communities unless required by regulations such as the Community Reinvestment Act (CRA). CRA encourages banks to meet the credit needs of low- and moderate-income neighborhoods, sometimes leading banks to partner with CDFIs or CDCs.
- Revolving Loan Funds (RLFs): Revolving Loan Funds are pools of capital established to provide loans for specific purposes, such as small business development, community projects, or environmental initiatives. As borrowers repay the loans, the repayments replenish the fund, allowing it to issue new loans. RLFs are often created by governments, nonprofits, or community organizations and may focus on economic development, disaster recovery, or sustainability goals. RLFs are unique because they are self-sustaining once established, relying on loan repayments rather than continual external funding. Unlike CDFIs or traditional banks, RLFs typically have more flexible lending terms and may target a niche audience, such as minority-owned businesses or startups in economically distressed areas.
- Angel or Venture Funds: Angel funds and venture funds are investment vehicles that provide capital to startups or early-stage businesses in exchange for equity or convertible debt. Angel funds are typically smaller, backed by wealthy individuals, while venture funds are institutional and often managed by professional firms. Both types of funds focus on businesses with high growth potential, often in technology, healthcare, or innovation sectors. These funds are unique because they assume higher risks than traditional lending or investment mechanisms, aiming for significant returns if the businesses succeed. They differ from CDFIs and RLFs, which focus on social impact and often provide loans, not equity. Angel and venture funds prioritize scalability and profitability rather than serving disadvantaged communities, though there are impact-focused venture funds that aim to combine financial returns with social or environmental benefits.
