Bond Guarantee Program

CDFI Bond Guarantee Program
Secondary Loan Requirements
Underwriting Review Checklist
PART I: INSTITUTIONAL LENDING REQUIREMENTS
Under the CDFI Bond Guarantee Program, the Eligible CDFI must maintain loan policies and
procedures to support Secondary Loans under the applicable asset class. The Eligible CDFI’s
loan policies and procedures will be subject to review as part of the Guarantee approval process.
Any changes to these policies made after the execution of the Secondary Loan should be
submitted for review and approval. Given the complexity of quantifying, modeling and
communicating financial (credit) risk, policies and procedures can range from simple qualitative
statements to complex quantitative models. If the Eligible CDFI uses qualitative statements, the
Eligible CDFI must support these statements with key indicators/metrics and values related to
the Target Market (as defined in 12.C.F.R. 1805.104 (ll)) and the industry and asset class.
Eligible CDFIs must be able to demonstrate compliance with their own underwriting policies
and standards. In addition, the CDFI Bond Guarantee Program requires that Eligible CDFIs
meet the following MINIMUM guidelines for credit evaluation and deliberation:
GOVERNANCE & ORGANIZATION
The Eligible CDFI must have governance and organizational structures that support lending
practices consistent with its mission. These governance and organizational structures must
include:
A governance structure that includes a board of directors or equivalent body (e.g.
executive committee);
Policies and procedures related to loan review, underwriting and approval; and
Delegations of authority related to loan approvals, consents, waivers and
modifications.
LOAN POLICIES AND PROCEDURES
The Eligible CDFI must have established policies and procedures that govern its lending
activities. The CDFI Bond Guarantee Program requires that these policies and procedures:
Include documented loan policies and procedures that are approved by the Eligible
CDFI’s board of directors (or equivalent body);
If the Eligible CDFI utilizes Bond Loan proceeds to finance or refinance the
acquisition or assignment of Secondary Loans from a third party, require that the third
party be a community development or mission-based lender as defined by the Eligible
CDFI;
Include a process for the update and approval of loan policies and procedures; and
Address:
o Loan origination and underwriting;
o Permitted lending activities;
o Secondary Loan interest rates compared with Bond Loan interest rates;
1

o
o
o
o
o
o
o

Credit approval;
Commitment and closing requirements;
Lease-up period management, monitoring, and risk mitigation (if applicable);
Credit reporting metrics and reserve policies;
Credit and risk management;
Loan and portfolio monitoring; and
Consideration of policy exceptions.

CDFI BOND GUARANTEE PROGRAM ASSET CLASSES
The following asset classes are eligible for Secondary Loans. If the Eligible CDFI proposes
to finance or refinance a Secondary Loan to these asset classes, it must maintain loan policies
and procedures that are applicable to the unique characteristics of that asset class. The
policies and procedures for underwriting Secondary Borrowers must also be consistent with
the CDFI Bond Guarantee Program’s Eligible Purposes:
1. CDFI-to-CDFI;
2. CDFI to Financing Entity (other than a Certified CDFI);
3. Charter schools;
4. Commercial real estate;
5. Daycare centers;
6. Healthcare facilities;
7. Rental housing;
8. Rural infrastructure;
9. Owner-occupied homes;
10. Licensed senior living and long-term care facilities;
11. Small business (for-profit); and
12. Not-For-Profit Organizations.
PART II: MINIMUM LENDING REQUIREMENTS BY ASSET CLASS
1. CDFI-TO-CDFI LENDING:
The Secondary Borrower must be a Certified CDFI or an affiliate of a Certified CDFI.
The Eligible CDFI’s underwriting policies and evaluation criteria for a Secondary Borrower
under this asset class must address the following:
Management and financial capacity and performance in all facets of operations,
including:
o Governance;
o Key personnel;
o Financial performance, liquidity, capital and asset adequacy and metrics;
o Loan underwriting policies and capacities;
o Loan origination processes;
o Portfolio and risk management, including collections and loan workouts,
delinquencies, charge-offs, non-accrual loans, and loss reserves;
2

o Management information systems; and
o Reporting and methodology on loan portfolio performance.
Status of all obligations, including:
o For debt obligations, current payment status and compliance with programmatic
and financial covenants;
o Maintenance of good-standing status with respect to all other obligations,
insurance and legal requirements; and
o Any recent or outstanding corrective actions at the time of the Eligible CDFI
underwriting of the Secondary Borrower.
Specifically in connection with the Secondary Loan:
o The asset classes for which the Secondary Loan proceeds would be used
(deployment of assets);
o Demand for loans from potential borrowers by asset class;
o Underwriting policies for each asset class as specified in other sections of this
Underwriting Review Checklist, as applicable, or comparable policies for other
asset classes;
o If the Secondary Borrower will provide financing for lease-up periods, additional
relevant financial and management capacities and risk mitigation policies;
o Sources of repayment of the Secondary Loan, including principal and interest
payments;
o An ability of the Secondary Borrower to pay monthly operating expenses;
o Liquidity and organizational cash flows with debt service coverage of the
Secondary Loan that can withstand fluctuations without interrupted debt service
payments; and
o Treatment and terms of any Credit Enhancements, grants, guarantees or other
support to the Secondary Borrower that impact the underwriting and/or risk
mitigation of the Secondary Loan.
2. CDFI-TO-FINANCING ENTITY LENDING:
The Secondary Borrower must be a Financing Entity as defined in 12 C.F.R. 1805.201(b)(2)
and an affiliate of a Certified CDFI. The Eligible CDFI’s underwriting policies and
evaluation criteria for a Secondary Borrower under this asset class must address the
following:
Management and financial capacity and performance in all facets of operations,
including:
o Governance;
o Key personnel;
o Financial performance, liquidity, capital and asset adequacy and metrics;
o Loan underwriting policies and capacities;
o Loan origination processes;
o Portfolio and risk management, including collections and loan workouts,
delinquencies, charge-offs, non-accrual loans, and loss reserves;
o Management information systems; and
o Reporting and methodology on loan portfolio performance.
Status of all obligations, including:
3

o For debt obligations, current payment status and compliance with programmatic
and financial covenants;
o Maintenance of good-standing status with respect to all other obligations,
insurance and legal requirements; and
o Any recent or outstanding corrective actions at the time of the Eligible CDFI
underwriting of the Secondary Borrower.
Specifically in connection with the Secondary Loan:
o The asset classes for which the Secondary Loan proceeds would be used
(deployment of assets);
o Demand for loans from potential borrowers by asset class;
o Underwriting policies for each asset class as specified in other sections of this
Underwriting Review Checklist, as applicable, or comparable policies for other
asset classes;
o If the Secondary Borrower will provide financing for lease-up periods, additional
relevant financial and management capacities and risk mitigation policies;
o Sources of repayment of the Secondary Loan, including principal and interest
payments;
o An ability of the Secondary Borrower to pay monthly operating expenses;
o Liquidity and organizational cash flows with debt service coverage of the
Secondary Loan that can withstand fluctuations without interrupted debt service
payments; and
o Treatment and terms of any Credit Enhancements, grants, guarantees or other
support to the Secondary Borrower that impact the underwriting and/or risk
mitigation of the Secondary Loan.
3. CHARTER SCHOOLS LENDING:
The Eligible CDFI’s underwriting policies and evaluation criteria for a Secondary Borrower
under this asset class must address the following:
Management and financial capacity and performance in all facets of operations,
including:
o Governance;
o Key personnel, including management depth and dependency on key personnel;
o Financial performance, liquidity, financial statements; and capital and asset
adequacy and metrics;
o Budgeting and forecasting of charter school performance and managing
discrepancies between the budget and actual results;
o Funding mechanisms and the ability to manage reimbursement delays;
o Educational credentials and experience in the development, management, and
operations of a charter school that includes a track record working with State and
local governments, as applicable;
o Yearly progress (or other defined measurement of school performance);
o A historical track record of charter school renewal that demonstrates success in
meeting charter school requirements and established goals;
o The likelihood of renewing its school charter(s), taking into account the strength
of state and local charter laws; and
o Compliance with licensing requirements for daycare centers.
4

Status of all obligations, including:
o For debt obligations, current payment status and compliance with programmatic
and financial covenants;
o Maintenance of good-standing status with respect to all other obligations,
insurance and legal requirements; and
o Any recent or outstanding corrective actions at the time of the Eligible CDFI
underwriting of the Secondary Borrower.
Specifically in connection with the Secondary Loan:
o Experience and capacity in constructing and renovating charter schools, if
relevant;
o The likelihood of sufficient student enrollment;
o All required charters and licenses for the school to be financed;
o An ability of the Secondary Borrower/project to pay all associated expenses on
the project that include principal and interest and all operating and maintenance
expenses;
o Working capital;
o Debt service coverage of the Secondary Loan and all associated Secondary
Borrower debt;
o Loan to value ratio; and
o Any Credit Enhancements, grants, guarantees or other support to the Secondary
Borrower that impact the underwriting and/or risk mitigation of the Secondary
Loan.
4. COMMERCIAL REAL ESTATE LENDING:
The Eligible CDFI’s underwriting policies and evaluation criteria for a Secondary Borrower
under this asset class must address the following:
Management and financial capacity and performance in all facets of operations,
including:
o Governance;
o Key personnel, including management depth and dependency on key personnel;
and
o Financial performance, liquidity, financial statements; and capital and asset
adequacy and metrics.
Status of all obligations, including:
o For debt obligations, current payment status and compliance with programmatic
and financial covenants;
o Maintenance of good-standing status with respect to all other obligations,
insurance and legal requirements; and
o Any recent or outstanding corrective actions at the time of the Eligible CDFI
underwriting of the Secondary Borrower.
Specifically in connection with the Secondary Loan:
o Operational and financial capacity for the proposed project that includes a funding
mechanism to ensure payment of the Secondary Loan and other obligations;

5

o Management and operational experience to carry out the proposed project that
includes licensing and background credentials; a track record in the development,
management, administration and operations of commercial real estate projects;
o Financial management capabilities and financial resources to undertake the
development and/or operation of the proposed project;
o Current market conditions, demand assumptions, vacancy rates, collection
assumptions, turnover rates;
o Revenues for the project that include cash flow projections, operating expenses,
debt service requirements and any other project related costs or conditions that
may affect the project;
o A methodology and narrative discussion for the projected increase in revenue;
o The terms and impact of ground leases or other ongoing restrictions to the project
and/or property;
o Operating, lease-up and replacement reserves and any other types of reserves
established for the project;
o Insurance, at all times, to support the project and the organization;
o As applicable, historical property financial performance that is supported by an
financial statement, rent roll, project leases and any other operating information
pertinent to the underwriting of the project;
o Working capital;
o Debt service coverage of the proposed Secondary Loan and all associated
Secondary Borrower debt;
o Loan to value analysis; and
o Any Credit Enhancements, grants, guarantees or other support to the Secondary
Borrower that impact the underwriting and/or risk mitigation of the Secondary
Loan.
5. DAYCARE CENTER LENDING:
The Eligible CDFI’s underwriting policies and evaluation criteria for a Secondary Borrower
under this asset class must address the following:
Management and financial capacity and performance in all facets of operations,
including:
o Governance;
o Key personnel, including management depth and dependency on key personnel;
o Financial performance, liquidity, financial statements, and capital and asset
adequacy and metrics;
o Budgeting and forecasting daycare center performance and managing
discrepancies between the budget and actual results;
o Funding mechanisms and the ability to manage reimbursement delays;
o A track record in working with State and local governments, as applicable;
o Compliance with licensing requirements for daycare centers; and
o Current background and legal checks of employees of the daycare center.
Status of all obligations, including:
6

o For debt obligations, current payment status and compliance with programmatic
and financial covenants;
o Maintenance of good-standing status with respect to all other obligations,
insurance and legal requirements; and
o Any recent or outstanding corrective actions at the time of the Eligible CDFI
underwriting of the Secondary Borrower.
Specifically in connection with the Secondary Loan:
o The specific population to be served (e.g, pre-school aged children, the elderly,
the disabled) and any on-site services to be provided;
o Experience and capacity in daycare center construction and renovation, if
relevant;
o The likelihood of sufficient enrollment, considering current market conditions,
demand assumptions, collection assumptions, operating expenses, debt service
requirements and any other project related costs or conditions that may affect the
project;
o All required licenses for the daycare center to be financed;
o State and local daycare facilities standards;
o Staffing plan to ensure the safety of all enrollees;
o An ability of the Secondary Borrower/project to pay all associated expenses on
the project that include principal and interest and all operating and maintenance
expenses;
o Working capital;
o Debt service coverage of the Secondary Loan and all associated Secondary
Borrower debt;
o Loan to value ratio; and
o Any Credit Enhancements, grants, guarantees or other support to the Secondary
Borrower that impact the underwriting and/or risk mitigation of the Secondary
Loan.
6. HEALTHCARE FACILITIES LENDING:
The Eligible CDFI’s underwriting policies and evaluation criteria for a Secondary Borrower
under this asset class must address the following:
Management and financial capacity and performance in all facets of operations,
including:
o Governance;
o Key personnel, including management depth and dependency on key personnel;
o Information on the healthcare facility’s sponsoring organization, if applicable,
that includes financial audits, historical performance and management
capabilities;
o Financial performance, liquidity, capital and asset adequacy and metrics that is
supported by financial statements, health service activity reports; reimbursement
activities, operating history and any other information pertinent to the
underwriting of the project;
o Budgeting and forecasting healthcare facilities performance and managing
discrepancies between the budget and actual results;
7

o Funding mechanisms and the ability to manage reimbursement delays;
o A track record in working with State and local governments and, if applicable, the
Federal government;
o Compliance with licensing requirements for healthcare facilities; and
o Current background and legal checks of employees of the healthcare facility.
Status of all obligations, including:
o For debt obligations, current payment status and compliance with programmatic
and financial covenants;
o Maintenance of good-standing status with respect to all other obligations,
insurance and legal requirements;
o The current standing as a Federally Qualified Healthcare Center (as defined in 42
C.F.R. 405.2401), or comparable accreditation; and
o Any recent or outstanding corrective actions at the time of the Eligible CDFI
underwriting of the Secondary Borrower.
Specifically in connection with the Secondary Loan:
o Experience and capacity in constructing and renovating healthcare facilities, if
relevant;
o Current market conditions, service demand assumptions, reimbursement
mechanisms and sources, collection assumptions, operating expenses, debt service
requirements and any other project related costs or conditions that may affect the
project;
o All required licenses for the healthcare facility to be financed;
o An ability of the Secondary Borrower/project to pay all associated expenses on
the project that include principal and interest and all operating and maintenance
expenses;
o Working capital;
o Debt service coverage of the Secondary Loan and all associated Secondary
Borrower debt;
o Loan to value ratio; and
o Any Credit Enhancements, grants, guarantees or other support to the Secondary
Borrower that impact the underwriting and/or risk mitigation of the Secondary
Loan.
7. RENTAL HOUSING LENDING:
In addition to multifamily rental housing, this asset class may include single family rental
homes, supportive housing, and rental housing for the elderly unless special licensing is
required. The Eligible CDFI must be able to demonstrate underwriting guidelines that
address the unique financial characteristics of these asset classes. The Eligible CDFI’s
underwriting policies and evaluation criteria for a Secondary Borrower under this asset class
must address the following:
Management and financial capacity and performance in all facets of operations,
including:
o Governance;
o Key personnel, including management depth and dependency on key personnel;
and
8

o Financial performance, liquidity, financial statements, and capital and asset
adequacy and metrics.
Status of all obligations, including:
o For debt obligations, current payment status and compliance with programmatic
and financial covenants;
o Maintenance of good-standing status with respect to all other obligations,
insurance and legal requirements;
o Any recent or outstanding corrective actions at the time of the Eligible CDFI
underwriting of the Secondary Borrower.
Specifically in connection with the Secondary Loan:
o Operational and financial capacity for the proposed project that includes a funding
mechanism to ensure payment of the Secondary Loan and other obligations;
o Management and operational experience to carry out the proposed project that
includes licensing and background credentials; a track record in the development,
management, administration and operations of rental housing projects; and
financial management capabilities and financial resources to undertake the
development and/or operation of the proposed project;
o Current market conditions, demand assumptions, vacancy rates, collection
assumptions, and turnover rates;
o Revenues for the project that include cash flow projections, operating expenses,
debt service requirements and any other project related costs or conditions that
may affect the project;
o A methodology and narrative discussion for the projected increase in revenue;
o The terms and impact of ground leases or other ongoing restrictions to the project
and/or property;
o Operating, lease-up and replacement reserves and any other types of reserves
established for the project;
o Insurance, at all times, to support the project and the organization;
o As applicable, historical property financial performance that is supported by an
financial statement, rent roll, project leases and any other operating information
pertinent to the underwriting of the project;
o Working capital;
o Debt service coverage of the proposed Secondary Loan and all associated
Secondary Borrower debt;
o Loan to value analysis;
o Additional policies for single-family rental homes, supportive housing, and
housing for the elderly (provided no special license is required); and
o Any Credit Enhancements, grants, guarantees or other support to the Secondary
Borrower that impact the underwriting and/or risk mitigation of the Secondary
Loan.
8. RURAL INFRASTRUCTURE LENDING:
As opposed to lending directly to urban municipalities, which have sufficient access to other
forms of capital, this asset class is intended to address the financing of municipal
infrastructural projects (water, sewer, etc.) that support development in low-income or
underserved rural areas as defined in 12 C.F.R. 1808.102 . The Eligible CDFI’s underwriting
9

policies and evaluation criteria for a Secondary Borrower under this asset class must address
the following:
Incorporation as an independent public governing body with elected officials that have
the authority to levy assessments and/or taxes as necessary to cover operating costs and
debt service;
Authority to issue debt secured by a revenue source under the control of the Secondary
Borrower;
Management and financial capacity and performance in all facets of operations,
including:
o Governance;
o Key personnel, including management depth and dependency on key personnel;
o Financial performance, liquidity, financial statements; and capital and asset
adequacy and metrics;
o Budgeting and forecasting performance and managing discrepancies between the
budget and actual results;
o Funding mechanisms and the ability to manage payment delays;
o A track record in working with State, local and Federal governments, as
applicable; and
o Compliance with all environmental and other governmental standards.
Status of all obligations, including:
o For debt obligations, current payment status and compliance with programmatic
and financial covenants;
o Maintenance of good-standing status with respect to all other obligations,
insurance and legal requirements; and
o Any recent or outstanding corrective actions at the time of the Eligible CDFI
underwriting of the Secondary Borrower.
Specifically in connection with the Secondary Loan:
o Operational and financial capacity to undertake the project, including licensing
and credentials;
o A track record of working with various public and private constituencies to
develop similar projects;
o Funding mechanisms and payment requirements, if any, that are predictable,
accountable and insulate sources of repayment from any potential performance
issues of the proposed facility or project;
o The authority and willingness to pledge any expected revenue source toward the
repayment of the Secondary Loan;
o The reliability and sustainability of pledged revenues through essentiality of
service, taxing powers, reasonably expected economic growth, and/or existing
demand, without expiration, competing claims or revocation except as
contemplated in the Secondary Loan agreement;
o Current market conditions, demand assumptions, collection assumptions,
operating expenses, debt service requirements and any other project related costs
or conditions that may affect the project

10

o An ability of the Secondary Borrower/project to pay all associated expenses on
the project that include principal and interest and all operating and maintenance
expenses;
o Working capital;
o Reserves for debt service, operations or maintenance to mitigate identified risks;
o Debt service coverage of the Secondary Loan and all associated Secondary
Borrower debt;
o Loan to value ratio;
o Any Credit Enhancements, grants, guarantees or other support to the Secondary
Borrower that impact the underwriting and/or risk mitigation of the Secondary
Loan; and
o A forecast of performance that incorporates assumptions with respect to user fees,
tax receipts, and other sources of revenue. The forecast of performance must also
be reasonable and consistent with local market conditions and trends.
9. OWNER OCCUPIED HOME MORTGAGE LENDING:
The Eligible CDFI’s policies and procedures must demonstrate:
o A process for compliance management for single-family mortgage loans that includes
The Home Mortgage Disclosure Act, Equal Credit Opportunity Act and Truth-inLending requirements as well as all other applicable Federal regulations;
o A history of successfully originating and servicing owner-occupied home mortgage
loans; and
o The capacity and staffing to originate owner-occupied home mortgage loans.
The Eligible CDFI’s underwriting policies and evaluation criteria for a Secondary Borrower
under this asset class must address the following:
o Use of the home as the Secondary Borrower’s primary residence and not for
investment;
o The condition of the property and durability of major systems (e.g. electrical and
plumbing)
o The provision of pre-purchase counseling;
o Property insurance coverage through and beyond the maturity of the Secondary Loan;
o Qualification as a “qualified mortgage” for purposes of the Consumer Financial
Protection Bureau’s “ability-to-repay” rules;
o Debt-to-income standards;
o Credit scores;
o Loan to value;
o Current compliance on all existing debt obligations; and
o Complete discharge of all bankruptcies for a minimum of two years prior to the
closing of the Secondary Loan.
10. LICENSED SENIOR LIVING AND LONG-TERM CARE FACILITIES LENDING:
Housing for the elderly should follow the lending policies for Rental Housing if no special
licensing is required. For Licensed Senior Living and Long-Term Care Facilities, the
Eligible CDFI’s underwriting policies and evaluation criteria for a Secondary Borrower
under this asset class must address the following:
11

Management and financial capacity and performance in all facets of operations,
including:
o Governance;
o Key personnel, including management depth and dependency on key personnel;
o Financial performance, liquidity, financial statements, and capital and asset
adequacy and metrics;
o Review of Centers for Medicare and Medicaid Service (CMS) records (if
applicable);
o Experience in the development, management, and operations of a licensed senior
living or long-term care facility that includes a track record working with State
and local governments; and
o Current background and legal checks of employees of the senior living and longterm care facility.
Status of all obligations, including:
o For debt obligations, current payment status and compliance with programmatic
and financial covenants;
o Maintenance of good-standing status with respect to all other obligations,
insurance and legal requirements; and
o Any recent or outstanding corrective actions at the time of the Eligible CDFI
underwriting of the Secondary Borrower.
Specifically in connection with the Secondary Loan:
o Operational and financial capacity for the proposed project that includes a funding
mechanism to ensure payment of the Secondary Loan and other obligations;
o Management and operational experience to carry out the proposed project that
includes licensing and background credentials;
o A track record in the development, management, administration and operations of
rental housing projects;
o Financial management capabilities and financial resources to undertake the
development and/or operation of the proposed project;
o The maintenance of insurance, at all times, to support the project and
organization;
o Current market conditions, demand assumptions, rates, fees, vacancy rates,
collection assumptions, turnover rates, including consideration of the number and
proximity of competing facilities;
o Revenues for the project that include cash flow projections, operating expenses,
debt service requirements and any other project related costs or conditions that
may affect the project;
o A methodology and narrative discussion for the projected increase in revenue;
o Diversity of payment sources;
o The terms and impact of ground leases or other ongoing restrictions to the project
and/or property;
o Operating, lease-up and replacement reserves and any other types of reserves
established for the project;
o Insurance, at all times, to support the project and the organization;

12

o As applicable, historical property financial performance that is supported by an
financial statement and any other operating information pertinent to the
underwriting of the project;
o Working capital;
o Debt service coverage of the proposed Secondary Loan and all associated
Secondary Borrower debt;
o Loan to value analysis; and
o Any Credit Enhancements, grants, guarantees or other support to the Secondary
Borrower that impact the underwriting and/or risk mitigation of the Secondary
Loan.
11. SMALL BUSINESS (FOR PROFIT) LENDING:
The Eligible CDFI’s underwriting policies and evaluation criteria for a Secondary Borrower
under this asset class must address the following:
o A track record of each Secondary Borrower principal’s ability to pay personal debt as
it comes due and to comply with all applicable Federal, State and local laws;
o The capacity to provide Eligible CDFI with recurring business financial reports that
include annual and interim balance sheets, income statements, and any other financial
or operational reports that the Eligible CDFI will require. If the Secondary Borrower
has any third-party guarantors, the aforementioned financial statement requirement
would apply to third-party guarantors;
o Knowledge of the business and market as evidenced by a complete business plan that
includes sections on marketing (e.g. product pricing and proposed customer base);
finance (e.g., monthly cash flow projections on a best, worst and most likely case
basis); operations, management plan and staffing; and proposed legal structure;
o Demand for its services as indicated in stable or increasing earnings before interest,
taxes, depreciation and amortization (EBITDA). The debt service of the Secondary
Borrower/ small business cannot depend upon rapidly increasing cash flow
projections;
o Sufficiency of operating cash flows to repay the Secondary Loan on time from the
operating cash generated over the term of the proposed Secondary Loan;
o Documented evidence of investment in the enterprise (small business) for which the
Secondary Loan is sought;
o Commitment for success of the small business;
o The ability of the Secondary Borrower to operate as a for-profit company;
o Any Credit Enhancements, grants, guarantees or other support to the Secondary
Borrower that impact the underwriting and/or risk mitigation of the Secondary Loan;
and
o Personal guarantees of all small business owners/principals for a portion or the entire
Secondary Loan or credit enhancement.
12. NOT-FOR-PROFIT LENDING:
When not-for-profit organizations undertake projects within the aforementioned asset classes,
underwriting policies for that asset class will apply. In cases when lending to not-for-profit
organizations do not correspond with the aforementioned asset classes, the Eligible CDFI’s
13

underwriting policies and evaluation criteria for a Secondary Borrower must address the
following:
o The track record of compliance with all applicable Federal, State and local laws;
o Proof of good standing as a non-profit entity under Section 501(c) of the Internal
Revenue Code;
o Stability of leadership including key management, staffing, and Board of Directors;
o An evaluation of liquidity and solvency through the current ratio and operating reserves
ratio;
o Current budget and comparisons of historical budgets to actual budgets;
o Funding diversity through an evaluation of the funding source concentration and related
ratio analysis;
o Debt service analysis;
o The capacity to provide the Eligible CDFI with recurring business financial reports that
include annual and interim balance sheets, income statements, and any other financial or
operational reports that the Eligible CDFI will require;
o Financial statements of any third-party guarantors;
o Capital campaign plan to support the Secondary Loan (if applicable); and
o Report on previous funding history.

14