Washington Area Community Investment Fund Invests in DC

Tim Flanagan, WACIF’s executive director. Photo: WACIF

Where do small businesses and budding entrepreneurs go when commercial banks find their proposals too risky? They go to the Washington Area Community Investment Fund, referred to more commonly by its acronym, WACIF. For over 25 years WACIF, a nonprofit 501(c)(3), has provided business counselling and capital to hundreds of small local businesses, which in turn have created hundreds of jobs and reinvested millions of dollars in local communities.

What Is WACIF?

WACIF works closely with the US Treasury Department as a CDFI, or community development financial institution, and also maintains a partnership with the US Small Business Administration (SBA). In DC, WACIF works closely with the Department of Housing and Community Development (DHCD) and the Department of Small and Local Business Development (DSLBD). “The Washington Area Community Investment Fund has been a steadfast partner of the Department of Small and Local Business Development (DSLBD),” says Ana Harvey, director of DSLBD. “WACIF has been instrumental in our efforts to make capital more accessible to DC small businesses and improve their financial literacy.”

The organization applies for and receives grants from federal and state agencies to sustain operations, provide programming, and lend money. In addition it receives funding and support from banks and private investors.

Tim Flanagan, WACIF’s executive director, and his staff prepare a roadmap to help small businesses that do not fit traditional bank loan underwriting models. Flanagan explains that “at the end of the day we are part of the spectrum. We are filling a niche, and most banks in DC have an active relationship with WACIF and are very generous with their time and resources.” These banks include large national corporations like Capital One and PNC Bank as well as smaller local institutions such as Industrial Bank and City One Bank. “The local community banks in particular,” adds Flanagan, “are committed to seeing community development thrive.”

However, long before qualifying for a traditional bank loan WACIF gives its clients a track record. Unlike a mortgage, which uses property as collateral, most business loans have little or no collateral for a lender to recoup in the event of default. Smaller businesses therefore often borrow using credit cards or “hard money,” a term describing high-interest private loans. CDFIs like WACIF provide a much needed alternative.

Flanagan recalls a client who was paying 28 percent on their line of credit. “Our 10 percent line of credit was a huge savings for their business. It allowed them to protect margins, give them breathing room, and pay down other debt. When a small business’s financial health improves they are more likely to hire and to reinvest into the community.”

WACIF may lend up to $300,000, but the average loan is about $80,000. Every year it closes 20-30 loans, and historically fewer than 4 percent of them have defaulted, beating industry-proven standards.

In the past five years WACIF has increased the size of its loan portfolio from $1.3 million to $3.2 million, doubling the size in the last three years alone. “This shows demand for these types of loans,” concludes Flanagan. In addition the interest derived from the augmented loan portfolio will help sustain WACIF’s operations. Dawn Leary, a WACIF board member since 2007, explains that “under Tim Flanagan’s leadership, WACIF has expanded its loan portfolio which has made WACIF less dependent on grant funding sources, allowing the organization to grow even if certain grants get slashed from government budgets.”

Going the Extra Yard

Loans are only part of WACIF’s mission. The organization also provides technical expertise, advice, and education. Jeremy Cullimore, director of communications and outreach at WACIF, provides startups and existing businesses with “Small Business Technical Assistance Program” workshops. “We are talking to people who are great at making a cake,” explains Cullimore, “but don’t know how to write a business plan, how to finance equipment, or how to negotiate a commercial lease.” Workshops also teach small business owners to “communicate their finances,” as Flanagan likes to say, and prepare them to be “bank ready.”

On average WACIF runs two workshops per month. Classes are held in Wards 5, 6, 7, and 8 at public libraries and community centers. Topics include basic coursework such as “How to Write to a Business Plan” or “Taxes & Insurance.” Another important workshop is “SWOT” (Strength Weaknesses, Opportunity, Training), presenting a methodology that forces business owners to take time out once a year to understand threats to their business, examine their business environment, and analyze where they are financially. In another workshop, “Legal Formation,” hosted by the DC Bar, a business owner might ponder whether to become an LLC, for example. “Finding a Home for Your Business” examines how to negotiate a commercial lease and lock in a rate.

Once a month WACIF hosts “Small Business Loan Days,” a counseling and technical assistance hybrid where prospects can ask bankers about small business financing. Banks prepare prospects for a range of items they look for during the underwriting process. WACIF also offers one-on-one business counseling, which is ongoing and open to anyone, to help aspirants get their business off the ground.

People Are Talking about WACIF’s Success

At-Large Councilmember Elissa Silverman, who recently attended a crowded WACIF workshop on access to credit, remarks: “Some of those in the room had great ideas but little business experience, or student loans and other debt that weighed down their credit score. WACIF makes these aspiring entrepreneurs into growing businesses that generate revenue and jobs for our city by making credit and technical assistance available to those considered too ‘risky’ for traditional lenders but who deserve an opportunity to succeed. And the return on investment has a multiplier effect. Just look at the new energy in commercial corridors such as Rhode Island Avenue NE!”

One such entrepreneur is Kendra Blackett-Dibinga, a Ward 7 resident, who has been with WACIF for two years. She first approached WACIF with a dream to open up her own Bikram Yoga studio. “Initially I didn’t have my finances in order,” admits Blackett-Dibinga, “and they told me what I had to get done. They helped me ‘right-size’ my expectations advised me about my financials and prepared me for bank financing.” WACIF lent Blackett-Dibinga $70,000 to open her first studio in Riverdale Park, Md. Her enterprise has been so successful that Blackett-Dibinga is getting ready to open her second Bikram studio in Ivy City, in Northeast DC, just a year later.

Hanif Aljami, owner of New World Development Group, a commercial general contractor located in Ward 7, approached WACIF for assistance at the onset of the recession. As the economy improved, Aljami’s company was awarded a $1.3 million drywall contract by American University. In construction, contractor payments are generally done in draws which come at the end of stated deliverable periods. Draws create cash-flow problems for small outfits like New World Development. A loan from WACIF allowed Aljami to meet payroll and keep the project on track. WACIF also assisted Aljami during a rough patch during which a large contract did not pay on time. “[WACIF] allowed us to pay just the loan interest until we were repaid. It’s amazing how much they help small businesses in the District,” recalls Aljami.

Community Forklift, which will celebrate its 10th anniversary this November, illustrates all the facets of WACIF’s capabilities and the impact that community reinvestment can have not only on the local economy but on the environment. It was founded by the Sustainable Community Initiative (SCI), established as a 501(c)(3). Based in Capitol Hill, SCI seeks to recycle waste and create jobs to provide concrete examples to support environmental advocacy. “When we talk about zero waste, Maryland’s climate action plan, green jobs, or sustainability, SCI can now talk about Community Forklift as an example. When groups talk about job losses due to a closure of an incinerator or a coal mine, SCI can provide proof about creating green jobs to replace them,” says Ruthie Mundell, director of outreach and education at Community Forklift. With WACIF’s help, SCI formed Community Forklift as a for-profit LLC, and provided business advice and debt consolidation to offset crippling credit card rates. Community Forklift now employs 45 people and keeps thousands of metric tons out of area landfills annually by diverting construction waste to a retail warehouse for resale to the public. “WACIF has gone above and beyond the financial contribution,” explains Mundell. “They have been an emotional support for us. They have held our hand every step of the way.”

Ward 6 Councilmember Charles Allen has seen the work of WACIF in the community. “WACIF is an important resource for small businesses and nonprofit organizations in the District that are looking to grow,” he remarks. It is “helping them access much-needed capital and providing technical financial assistance. Our small businesses are crucial to building strong neighborhoods. WACIF’s support for District entrepreneurs and organizations helps them grow, create jobs, and invest in our communities.”

Tim Flanagan will be leaving the organization sometime in early 2016 as soon as he helps transition a yet-to-be named successor. Board member Dawn Leary explains that “we’re building on a legacy that was started under Tim’s Leadership. We are looking for someone to continue Tim’s work.”

For more information about WACIF or to attend a workshop visit www.wacif.org.

Phil Hutinet is the publisher of East City Art, dedicated to DC’s visual arts. For more information visit www.eastcityart.com.

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