This is the third in a six-part series spotlighting CDFIs in the Wells Fargo Works for Small Business®: Diverse Community Capital program network, funded with a $175 million commitment to help diverse small businesses grow. Every Tuesday for the next three weeks, we will publish a story and case study that highlight an innovative program or service of these CDFIs. Follow the series here.
Across the Northern Rockies, MoFi provides products and services that transform lives and strengthen community prosperity. Offerings include New Markets Tax Credit loans, community facilities loans, and home buying assistance loans. But the CDFI’s core business is its small business financing and services.
“Small business funding is the heart and soul of our organization—it drives our decisions,” explained Betsy Beauvais, MoFi’s Director of Lending. “We have been serving small businesses for a long time and are always looking for ways to do more for them. We can do all these things on the front end—get to know clients, help them get financing, create a nice package of technical assistance—but we always ask ourselves, what else is out there?”
One of the answers is banks: According to Betsy, 100 percent of MoFi’s clients are unbankable when they first come to the CDFI. “Some have no relationship with a mainstream lender at all. Others have tried, but ultimately don’t qualify for bank loans.”
Charting a Path to Bankability
MoFi, which is part of the Wells Fargo Diverse Community Capital network, saw that it could, and often did, play a key role in helping entrepreneurs navigate the path to long-term bank relationships. Three years ago, it launched a formal initiative—Path to Bankability (PTB)—to do just that. The program helps MoFi’s small business clients connect to the financial mainstream.
“Building a relationship with a bank can be intimidating if someone’s not used to it, but once people have that relationship, they have access to so much more,” Betsy said. “Banks offer a whole suite of business and personal products and services that we don’t. And being part of the financial mainstream does a lot in terms of how people fit in and operate in their communities—they’re more confident and connected.”
Betsy added that MoFi’s loan terms are also often priced higher than those at banks “When a bank refinances our loan, client’s payments are lowered.”
PTB is carefully and smartly designed to make every MoFi borrower bank-ready. With each small business loan client, MoFi lenders create a customized PTB plan prior to a loan’s closing. The plan is crafted in collaboration with a bank—and a banker signs off on it—to address specific reasons the borrower didn’t qualify for traditional financing.
Guiding the Client Journey
MoFi also builds into its Salesforce system automated tasks and milestone markers to help track progress on the borrower’s PTB plan. Throughout the life of the loan, MoFi consults with the client, offering financial education and technical assistance as needed. And MoFi also gives the bank regular updates about the client’s progress.
“Our consulting services team tracks these clients to try to get them out the door and to a bank for loan refinancing,” said Betsy. “It’s really an extra benefit we offer our clients: if we get them to bank relationships faster, they're going to pay less in debt and have more services available. And it means their business is on a good track, if the bank is ready to refinance.”
Once the PTB goals are met, MoFi works with the client to fill out a bank loan application and compile information for underwriting.
When borrowers come to MoFi without any type of bank relationship, personal or otherwise, MoFi works with them to find a bank fitting their needs.
Currently, it takes about 36 months for MoFi’s clients to work through a PTB plan. The CDFI is working to cut that number in half.
“We always tell our clients we want to have a really short relationship with them because we want to get them to a bank,” said Betsy. “MoFi cares deeply for our clients and the PTB is one way we support them.”
Learn more about the history and impact of MoFi’s PTB program in OFN’s case study.
Next up in the series: Northern Initiatives’ Blended Learning Approach to Technical Assistance
About Wells Fargo Works for Small Business®: Diverse Community Capital program
The Wells Fargo Works for Small Business®: Diverse Community Capital program (DCC) will deliver $175 million in capital to Community Development Financial Institutions (CDFIs) that serve diverse small businesses. Since program launch, DCC has awarded $94.8 million in grants and capital to CDFIs to grow their lending and services to diverse small businesses.