CDFI Federal Funding Impact Model

The Bottom Line

Losing $2M in federal grants forces this CDFI to replace free money with market-rate debt, nearly doubling their cost of capital from 2.44% to 4.73%. That 2.29% increase means borrowers pay an extra $5,725 annually on a typical $250K loan—often the difference between expanding and surviving.

Current State

With federal support intact

Bank CRA Loans

5-year, below market

$35M

@ 4.5%

Foundation PRIs

10-year patient capital

$20M

@ 2.0%

CDFI Fund Awards

Unrestricted grants

$15M

@ 0%

State/Local Grants

Program funding

$5M

@ 0%

Earned Revenue

Retained earnings

$10M

@ 0%

Weighted Average Cost of Capital

2.44%

Enables 5.5% loans to borrowers

After $2M Federal Cut

Forced to find replacement capital

Bank CRA Loans

Same (for now)

$35M

@ 4.5%

Foundation PRIs

Can't increase

$20M

@ 2.0%

CDFI Fund Awards

Reduced

$13M

@ 0%

→ New Bank Debt

Market-rate

$2M

@ 8.5%

State/Local Grants

Unchanged

$5M

@ 0%

Earned Revenue

Under pressure

$10M

@ 0%

New Cost of Capital

4.73%

+2.29% = 7.8% borrower rates

What This Means for Communities

Childcare Center

Maria's $250K loan jumps from $1,146 to $1,623/month. That extra $5,725/year was her new teacher's salary.

CDFI Operations

Must charge 7.8% vs 5.5%, or cut technical assistance from 15 to 8 hours per borrower.

Lost Opportunities

30% of borrowers no longer qualify. $12M less lending means 48 businesses don't get funded.

When Federal Funding Disappears: A Survivable Scenario with Community Consequences

Current State

After $2M Federal Cut

What This Means for Communities