Thursday, January 24, 2013

Two Sources of Cash to Grow Your Retail Business | FundWell

Often people seeking to open a small retail business, such as a clothing store, in a lower-income community face challenges.

Low-income individuals often have a more difficult time obtaining financing for their small businesses. Low-income communities tend to lack infrastructure that small businesses need to grow, such as safe business corridors that enjoy foot traffic. Because it is often hardest to start and maintain small businesses, such as retail stores, in the areas in which they are most needed, federal, state, and local governments have developed programs to assist small business owners gain access to capital and to attract small businesses to lower-income areas. There are many different kinds of incentive programs across the country. Below is a general overview of two different types of financial assistance that may be available to your small retail business.

Assistance Gaining Access to Capital (CDFIs)

Understanding that small businesses seeking financing in traditionally underserved communities faced significant financing barriers, the federal government created the Community Development Financial Institutions (?CDFI?) Fund in 1994. Administered by the U.S. Department of the Treasury, the CDFI Fund does not itself loan money to individuals, rather it provides financing, including capital and tax credits, to CDFIs?banks, credit unions, venture capital funds, and nonprofit community lenders?which in turn lend money to individuals which meet the CDFI?s criteria. Not every bank is a CDFI. In order to be designated a CDFI, an institution must submit a CDFI Certification Application to the Fund for review and approval. To be eligible for certification, the institution must be located in an underserved or under-developed part of the country, and ?Have a primary mission of promoting community development.? There are more than 1,000 CDFIs operating in the United States.

CDFI?s provide financing to people in low-income urban and rural areas who would otherwise have a difficult time obtaining capital at competitive rates. CDFI?s provide more than financing, however. CDFI?s provide financial education and counseling services to their customers as well. Each CDFI sets its own programs and criteria for financing eligibility, so to determine if CDFI funds might be available for your small retail business, you need to contact individual CDFIs. The CDFI Fund maintains a searchable database of CDFIs at The experts at FundWell ( can also help you determine what CDFIs might make sense for your business. When applying, remember that the mission of CDFIs are to promote community development, so be sure to have considered how your small retail business will help the CDFI meet that goal by lending to you, and be ready to demonstrate your commitment to the community.

Tax Increment Financing (TIFs)?

Tax Increment Financing or ?TIF? is a tax revenue tool used by state and local governments to spur economic development in blighted areas. TIF uses anticipated future gains in property tax revenue (the ?tax increment?) to subsidize the current development and improvements necessary to bring about the higher property values that will generate those future gains in property tax revenue. For example, in order for a city to attract a developer to a blighted area, the city may help finance some or all of the developer?s eligible project costs (such as sidewalk improvements, environmental remediation, site grading), using capital it borrows against the future increases in the property-tax revenue that will result by virtue of the development.

Jurisdictions establish their own TIF programs and establish criteria to determine what geographic areas and projects are eligible for those programs. Some of these programs could be especially helpful to a small retail business. In Chicago, for example, the Department of Housing and Economic Development?s Tax Increment Financing program developed TIFWorks. TIFWorks is a workforce development initiative that funds workforce-training costs for businesses located in TIF districts. Types of eligible training include technology skills, management, and sales. Other jurisdictions have created their own programs, so be sure to investigate what options are available in your area.

If you think that your small retail business might be eligible for CDFI financing or TIF, let the experts at help you make sense of the alphabet soup. FundWell ( can also help you learn more about all of your financing options?public and private, traditional and alternative. Visit us today!


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