Glossary
The difference between an organization's total assets and total liabilities. Formerly called fund balance or net worth.
Those assets that were restricted for either a period of time or for a particular purpose for which donor-imposed conditions have been met, thus allowing the assets to become available for use.
Sometimes referred to as "Margin," this term refers to the difference between the interest earned on loans and investments and the interest paid on borrowings and/or deposits (or cost of funds), divided by average earning assets. For example, if in a year a CDFI earns $6,000 on loans, pays out $3,000 in interest to investors, and has average loans outstanding of $100,000, the calculation would be: ($6,000 - $3,000)/$100,000, or 3% net interest margin.
The total assets of a CDFI minus its total liabilities. The terms net worth, net assets, net capital, total equity and shareholders equity are often used interchangeably. Net worth generally comprises capital that accumulates from earnings or from grants, but may also include secondary capital or EQ2.
A program administered by the U.S. Treasury's CDFI Fund designed to incentivize equity investments in low-income communities. Investments in designated Community Development Entities (CDE), including certified CDFIs, receive a 39% federal tax credit over seven years. The CDE must in turn deploy the investment in qualified low-income communities for such purposes as loans or equity investments in small businesses, mortgages, or real estate development.
A financial security that generally has a longer term than a bill, but a shorter term than a bond. However, the duration of a note can vary significantly, and may not always fall neatly into this categorization. Notes are similar to bonds in that they are sold at, above or below face (par) value, make regular interest payments and have a specified term until maturity.
A loan or other financial resource available to a CDFI through a third party, but which have not been "drawn down," or used. Perhaps the most common off-balance sheet resource is a line of credit. Only that portion of a line of credit that is drawn down, and thus is repayable, is reflected on a CDFI balance sheet. Undisbursed grants or multi-year contributions are not considered off-balance sheet resources.
A document, signed by an authorized officer of an entity, which confirms certain facts to the counterparty of a transaction, often that no "event of default" exists under the agreement and that all warranties and representations in the agreement continue to be true and correct as of the closing date.
That part of an audit in which the accountant gives his/her opinion as to whether or not the financial statements are in accordance with generally accepted accounting principals and whether or not the financial statements represent fairly the financial position and change in financial position of the organization.
An arrangement whereby two or more lenders pool their resources to provide a loan to a single borrower. Participation loans enable lenders to share risk (and profits) and to make loans in amounts that are higher than their limitations as individual lenders. Participation loans are particularly useful in advancing CDFI commercial or small business lending, and in attracting mainstream financial institutions into a deal.
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