The level of debt in a project. "Highly leveraged" projects have a high level of debt compared to equity as a source of funds. For a CDFI, to borrow money in order to multiply outputs (loans or investments) and outcomes (results, including income and community development impacts). A CDFI that does not produce more outputs and outcomes as a result of taking on new debt would not be leveraging these funds wisely.
Claim on the assets of an organization—excluding ownership. Characteristics include: 1) It represents a transfer of assets or services at a specified or determinable date; 2) The organization has little or no discretion to avoid the transfer; and 3) The event causing the obligation has already occurred.
A legal right to have a debt repaid out of specifically identified property of the debtor.
A business form that combines the characteristics of a corporation with the pass-through tax treatment of a partnership. In an LLC, the members of the company cannot be held personally liable for the debts or liabilities of the company.
Deposits of funds in banks to support lending efforts for a charitable outcome, including to historically underserved businesses, geographies, and women-owned or minority enterprises.
Refers to the availability of cash, or "near cash resources," for meeting an organization's obligations. Near cash resources typically refers to investments, inventory, accounts receivable and other assets expected to be available in cash within three months. In the simplest terms, liquidity is the amount of capital that is available to a CDFI for lending or investments. Sources of liquidity may be cash or credit. Liquidity can be affected by lending demand and volume; interest rates charged by investors; regulatory requirements; central bank/corporate credit union deposit requirements; unusual expenses or losses; or the availability of secondary markets for loans and investments.
Funds provided to an organization with a commitment to repay the principal. Loans can have senior or subordinate status, affecting the lender's priority of repayment over other creditors.
The documents executed in connection with a loan. Typically, they include the loan or credit agreement, one or more promissory notes, officer's certificates, and opinions from counsel. May also include an intercreditor or subordination agreement, guarantee, pledge agreement or mortgage, all dependent upon the terms and conditions of the loan.
Funds retained by the foundation as risk mitigation towards loan default.
The process of collecting information on the financial and programmatic performance of a loan during repayment.
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