Small business owners seeking financing may have faced tighter credit conditions in recent quarters, particularly from banks. During the first quarter of 2025, 16 percent of banks tightened their credit standards for small businesses with less than $50 million in revenue, compared to 11 percent the previous quarter, according to the Federal Reserve’s Senior Loan Officer Opinion Survey (SLOOS). In addition to lower approval rates, this “credit tightening” can refer to things such as lower loan maximums, higher premiums or stricter collateral requirements.
As an alternative to banks and online lenders, Community Development Financial Institutions (CDFIs) can offer many resources, including capital, that are helpful to small-business owners no matter the economic conditions. Here’s what small-business owners need to know.
What is a CDFI?
CDFIs are certified through the U.S. Treasury Department, and are specifically missioned to provide resources to underserved markets that can include minority- or women-owned businesses, or businesses that are located in or serve low-income communities. CDFIs like Accion Opportunity Fund even offer other services like personalized guidance from experts and onlione courses. While CDFIs can be depository institutions, like banks or credit unions, nearly 40% of CDFIs are nonbank loan funds, according to recent data from the CDFI Fund. In addition, the highest percentage of business lending by CDFIs in 2023 came from loan funds and VC funds.
Business owners who have had poor experiences with accessing credit at big banks may be quick to write off CDFIs, according to Sachi Shenoy, CEO and co-founder of Radiant Data, a data infrastructure and analysis company, but they exist expressly to fill those gaps. “Even though CDFIs have ‘financial institution’ in their name, they operate very differently from, say, a J.P. Morgan Chase,” she says. It’s important to note that though they are mission-driven institutions, even nonprofit CDFIs are still focused on generating revenue, and expect repayment on their loans.
CDFIs may be more resilient to changing regulations than other financial institutions
Private funders provide the “lion’s share” of CDFI funding, according to Sarah Merion, co-founder of Radiant Data, which means they may be more resilient to changing policies than government institutions, or even banks. This is especially important given the recent executive order that reduced the functions of several government entities to their “minimal functions,” which has caused a delay in the disbursement of $324 million to the CDFI Fund.
In recent months, Merion and Shenoy have both seen an emphasis on the impact of private capital on CDFIs and small businesses and a push to make CDFI funding a bi-partisan issue. Efforts to counteract any coming economic uncertainty include things like fast-tracking multi-year grants and increased data collection on the areas that may be impacted most.
Beyond these efforts, Merion also emphasizes the power that small-business owners themselves have when it comes to future CDFI funding. “CDFIs really want to know that their loans are having an impact,” she says, adding that most of them act on feedback they receive from borrowers.
Do you qualify for a CDFI loan? You may be surprised
Many businesses are also quick to disqualify themselves preemptively due to previous experiences with financial institutions. But CDFIs exist expressly to fill funding gaps that arise from stricter bank qualification requirements, says Shenoy. “Even if [business owners] have a low credit score, even if they don’t have a credit history, even if their business is maybe six months old but is starting to see a glimmer of traction, they can be eligible,” she says.
Though CDFI qualification requirements can vary depending on the type of lender you find, CDFIs can have personal credit score requirements as low as 600, and some may approve even business owners with lower credit scores in specific cases. In addition, while most banks require at least two years in business to qualify for a loan, you may be more likely to find CDFIs that will lend to startups with little to no experience, all while preserving the lower interest rates and favorable repayment terms you might see at a bank.
CDFIs offer more than just financial assistance
In addition to capital, Shenoy reminds business owners to take advantage of other resources that CDFIs have to offer. In 2023, almost 75% of CDFIs surveyed had offered additional services — such as business technical assistance, credit counseling, financial education and more — to their target markets, according to the CDFI Fund.
Many CDFIs have entire business advisory arms that pair you up with a business mentor who can give you guidance, advice and even access to their networks. Colorado Enterprise Fund, a Colorado-based CDFI, for instance, offers in-house consulting services to its clients throughout the life of their loans, completely free of charge. Similarly, Accion Opportunity Fund, another CDFI based in California, offers group sessions and one-on-one business coaching to its clients at any stage of business.
Even if your CDFI doesn’t have an established advisory arm, Shenoy advises not to be afraid of reaching out to a CDFI for help or advice.
How to get CDFI funding
To make sure you’re prepared to access capital through a CDFI, it helps to have your business’s story “collected and organized,” says Patrick Reily, co-founder of Uplinq, a credit scoring and assessment platform for small-business lenders. Especially when it comes to newer businesses, “lenders are interested in the competence of the business owners and the background and the experience of the business owners,” he says.
It’s also prudent to start building relationships with lenders as soon as possible, before you need funding, Reily adds. In addition, “there’s nothing wrong with having more than one relationship at multiple institutions because products change and market opportunities change,” he says.
As far as researching these institutions, Reily says it doesn’t hurt to start with local CDFIs, and to look for institutions that make a high number of SBA loans, which can be an indicator of seriousness toward small-business lending in general. He also emphasizes the importance of transparency, and being wary of “slick talkers”, especially when it comes to interest rate ranges and fee structures. A lender “should be able to give you tangible information before you see the lending agreement,” Reily says.
Bottom line
Against a backdrop of changing government policies and regulations, the dependence on private funders by CDFIs may make them more reliable sources of capital for small businesses. CDFIs can offer access to financing for those who may not qualify with banks, and provide additional resources like counseling and education as well.
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