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Cascade: No. 67, Winter 2008

NCALL Loan Fund: Filling Funding Gaps

What can be more difficult than finding predevelopment funds? If you ask NCALL (National Council on Agricultural Life and Labor Research Fund Inc.), it is finding predevelopment funds in rural areas, such as in Delaware. NCALL recognized that many of its nonprofit customers faced this challenge and became a community development financial institution (CDFI) in 2004. While NCALL is not the only statewide CDFI in Delaware, it is the only one with a mission that is primarily focused on rural areas.

NCALL, a 501 (c)(3) nonprofit based in Dover, Delaware, has been providing technical assistance to nonprofits focused on housing development and homeownership counseling to individuals for over 30 years. Since 1983, it has been making small predevelopment loans to nonprofits, often in conjunction with multifamily housing development. NCALL formalized its approach to lending and began making larger loans when it became a CDFI and created the NCALL loan fund.

NCALL hired Karen Kollias, a community development lender with over 25 years’ experience, including with ShoreBank, to manage the loan fund. Kollias, originally from Delaware, had been providing NCALL with technical assistance on its CDFI application while she was at NeighborWorks America (formerly the Neighborhood Reinvestment Corporation). Joe Myer, executive director of NCALL, said: “Kollias brings a key set of community development lending and financial skills that were not previously available in Delaware.” Working with Kollias is Dave Callahan, a lender with 15 years’ experience in community banking who oversees customer service, settlements, and servicing activity of the loan fund.

NCALL has focused its efforts on rural areas in Delaware, although it is able to lend throughout the Delmarva Peninsula, which includes the entire state of Delaware and portions of Maryland and Virginia. The loan fund offers a variety of products, including predevelopment loans, revolving lines of credit, construction loans, gap/bridge financing, and credit enhancements/ guarantees. In addition to underwriting loans, NCALL provides nonprofits with feedback on their financial position. Most of NCALL’s loans are for no more than five years and are typically made at market interest rates or slightly below market. Most of the loans have terms and conditions that would be difficult for a traditional lender to offer.

One of the main challenges that NCALL faces is raising enough capital to meet the demand for loans. Kollias said, “The loan fund has grown tremendously since its inception in 2004, but we are always looking for ways to secure additional capital. It is a balance between projects we want to support and the capital we have available. We have had to be very creative in bringing other funding sources to our table.” According to NCALL, the loan fund has received capital from the CDFI Fund, NeighborWorks America, Fannie Mae, JPMorgan Chase and Co., Wachovia Regional Community Development Corporation, the Longwood Foundation Inc., and the Welfare Foundation Inc.

NCALL and Discover Community Development Corporation participated in $1.5 million of financing that enabled Community Legal Aid Society Inc. to acquire and renovate a new office building in Georgetown, Del.NCALL and Discover Community Development Corporation participated in $1.5 million of financing that enabled Community Legal Aid Society Inc. to acquire and renovate a new office building in Georgetown, Del.

NCALL’s capitalization strategy includes attracting a mix of local, regional, and national investors who share in NCALL’s mission. NCALL offers a great deal of flexibility for investors, including project-specific loan participations. Kollias noted: “Every participation is different, as is every project, and NCALL is willing to structure participations to meet the financial requirements of its investors.” NCALL said that lenders that have participated in loans include Discover Community Development Corporation (DCDC),* NHSA-CDFI (an affiliate corporation of Neighborhood Housing Services of America), Deutsche Bank, the Housing Assistance Council, and Neighborhood Capital Corporation.

In 2006, Discover Bank’s CRA director, Matthew Parks, asked NCALL to participate in and service loans on behalf of DCDC. DCDC has participated with NCALL on loans and lines of credit totaling $17.9 million. The loans and lines of credit have been made primarily to for-profit organizations for land or building acquisition with a community development impact. While the purpose of these loans was consistent with NCALL’s mission, the loan size and type of borrower would have prevented NCALL from making the loans without a partner like DCDC.

The capital for the loan fund provided by DCDC has enabled NCALL to further build its capacity by generating origination and loan servicing fees. Parks explained: “DCDC chose NCALL as its lending partner because of Discover Bank’s longstanding relationship with the organization and NCALL’s continued commitment to meeting the housing and service needs of southern Delaware’s low- to moderate-income community.”

Since becoming a CDFI, NCALL has closed 33 loans and provided $26 million in financing, of which $21 million came from other lenders. The loans have financed 46 single-family housing units, 308 multifamily housing units, five office buildings for nonprofits, rural infrastructure improvements, working capital, and a single room occupancy residence. Kollias added, “CDFIs are a critical tool for rural development and an important resource in Delaware. They are able to connect regulators, borrowers, and other lenders, and structure financing in ways that make the deals work.”

For information, contact Karen Kollias of NCALL at (302) 678-9400 or kkollias@ncall.org; www.ncall.org; or Matthew Parks of Discover Bank at (302) 323-7485 or matthewparks@discover.com; www.discoverbank.com. External Link

  • * DCDC was formed in 2005 as a for-profit subsidiary of Discover Financial Services to provide community development loans within portions of Kent and Sussex counties, Del.