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V O L . X X I V N O. X X V I I N OV E M B E R 2 6 , 2 0 1 8 22 B A N K I N G / F I N A N C E F O C U S » C O N T I N U E D F RO M P R E V I O U S PA G E Congratulations to Waynflete! People's United Bank and Wright-Ryan Construction are proud to partner with Waynflete. Congratulations on your completion and ribbon cutting of the Lower School! ©2018 People's United Bank, N.A. | Member FDIC Lisa Hook Commercial Banking, SVP 207-828-3049 lisa.hook@peoples.com Cordelia Pitman Preconstruction Services 207-773-3625 cpitman@wright-ryan.com a higher risk of delinquency. CDFIs generally charge higher interest rates to mitigate risk and also help pay for their more-comprehensive services, which include technical services and business and financial counseling. At MaineStream Finance, interest rates tend to be higher than a bank's, says Linder. "We're not a charity. We have to be paid back," Linder says. "If people don't pay us back today and they see us as a charity, that means we're not helping other clients tomorrow." e challenge for the CDFI industry, like the economic development industry in general, is taking reasonable risks, says Will Armitage of the nonprofit Southern Maine Finance. "We're supposed to take on that level of risk," Armitage says. "But we have to make sure we're not overexposing our- selves. It's always been a question of, Do we have sufficient funding to fulfill the need that exists?" Real conversations e work of CDFIs is characterized by personal attention and a deep under- standing of local communities, which also helps to mitigate risk. Community Concepts, where the default and delinquency rates are less than 3.5%, examines the same things a bank does, like collateral and debt scores. "But we spend more time with the client, and we're not constrained by regulators," Holmes says. "We under- stand that, yes, their credit score is low, but here's why. We want to meet them and understand their dedication and commitment to what they want to build for a company. We have real conversa- tions about that." Having more regulatory lati- tude means the institutions can be more flexible. "We have the flexibility to be more patient with our financing structure, to work with the borrower," says Armitage. "If a business experiences a hiccup or slowdown, we can be more patient than the banking industry, because we don't have regulators saying, 'at loan is three months past due.' at flexibility is criti- cal to some of these businesses as they expand or start up." Searching for capital In addition to federal funding, CDFIs attract capital from private and public sources, like corporations, individuals, impact investors and private founda- tions. ey work with conventional financial institutions to channel private investment into distressed communi- ties, either through direct investment in the CDFI or coordination of lending, investment and other services. Borrowing locally from community banks and credit unions is relatively easy, says Linder. But, just like the small busi- nesses they serve, smaller CDFIs like MaineStream struggle to convince large banks and impact investors outside of Maine to provide capital. "We're always in search of capital," Linder says. "Unlike banks and credit unions, we're not deposit-taking. We borrow from banks: It's called whole- sale lending. e bank lends to us and we make smaller loans on a retail basis. But sometimes investors or lenders don't want to talk with smaller rural CDFIs, because we don't put up a lot of num- bers. We can't say, 'We helped 10,000 people this year.'" To address the issue, MaineStream, Community Concepts and Four Directions Development Corp. in Orono recently approached larger inves- tors collectively, so they could present larger numbers. "We've had one success so far," says Linder. "We'll do that again." Education and support High-distress areas — those with high poverty, high unemployment and low income — particularly benefit from the CDFI model, says Susan Hammond, executive director of Four Directions, a specialized Native American CDFI. Native communities face unique challenges to economic growth, such as putting up collateral. "Most lenders need collateral and tribal members don't have the ability to have their property assigned to a non- tribal entity," Hammond says, explaining that tribal land is often held in trust by the tribe or the Bureau of Indian Affairs, so ownership can't transfer away from the tribe. "We have the flexibility to cre- ate loan products and underwriting cri- teria that address their needs," she says. Laurie Schreiber, Mainebiz senior writer, can be reached at lschreiber @ mainebiz.biz We're always in search of capital. Unlike banks and credit unions, we're not deposit taking. We borrow from banks. — Chris Linder CEO, MaineStream Finance

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