Participate in a conversation about the challenges in running a top-performing CDFI loan fund. We will share our tips and experiences and learn how we can help you meet your performance goals.

1. Meet Your Deployment
Goals for 2014 & Beyond!
Facilitated by:
Jason Friedman, Principal &
Barbara Eckblad, Associate

2. Using Goto Webinar
• All participants will be on mute.
• You will see a panel on the right hand
side. Under the Audio tab you will see
the dial in number and access code you
were e-mailed previously. To join the
call, then enter in the Audio PIN
number.
• Q&A: we‟ll save 30 minutes for Q&A;
type your questions in the Questions
Tab.
• You may also use the “Raise Hand”
button to alert the presenters that you
have a question or comment.
2

3. The Friedman Associates Team Approach
We grow organizations
thoughtfully for
sustainability.
We help you maximize
your impact now for
long-term results.

4. Friedman Associates
Mission: inspire nonprofit leaders to achieve
their vision for the entrepreneurs and
communities they serve - and demonstrate
the results that lead to increased funding and
long-term success.

5. Our Value-Added: Build Strong
and Sustainable CDFIs
 Develop, Assess and Improve Loan Fund Operations
and Management
 Improve Effectiveness and Impact of Business
Development Services
 Develop Key Performance Indicators and Systems
to Demonstrate Impact
 Strategic Planning
 Board Development
 Preparation of SBA, CDFI and HHS applications

6. Jason Friedman, Principal
• 30 years in the microfinance and
small business CDFI industry.
• Consults with the federal and
state governments; foundations;
national and state associations;
and nonprofits to design and
develop programs to create equal
access to capital in distressed
communities.

7. Barbara Eckblad
• Core expertise: scaling loan programs; portfolio
management; aligning of staff, products and systems; new
product development/expansion; earned income strategies;
loan operations systems; technical assistance deployment;
building collaborations.
• Director of Lending for Wisconsin Women's Business
Initiative Corp. where she oversaw all aspects of the loan
fund and grew the loan portfolio by 67% over 3 years and
decreased delinquency rates to below-industry standards.
• Small business ownership experience, including building an
innovative commercial and residential real estate firm from
start-up to largest market share, eventually transitioning the
firm to employee ownership.

8. Building a loan fund is like building
a house. Quality matters….

9. Key Questions for Today
1. Is our lending process efficient? Is it structured to go
to scale?
2. Does our technical assistance really support our
clients?
3. Is our underwriting keeping pace with changes we see
in the market?
4. Do we know the risk areas in our loan portfolio? Are
we paying attention to them?
5. Is our collections process getting us the results we
need?
6. Are we pro-active or re-active in managing our grants?

10. What Does it Take to Build an
Efficient Lending Process?

11. Staff structure and responsibilities
• How clear are staff job
responsibilities?
• Tension between front line folks
and back office/ops folks?
• Structures for regular
communication
• Vignette: Staff book club!

12. Staff structure and responsibilities
• Is there an alignment of staff
skill sets to job
responsibilities?
• The loan application process
should move from task to task
efficiently with no “circle-
backs” or “back-and-fills” as
an ED I know likes to call
them.

13. Institutional Capacity
• Is there full capacity for key
positions?
• With growth comes the question
of capacity
• Marry your growth plan to
your strategic plan
• Vignette: what can you do
with a .5 FTE?

14. Loan fund policies and procedures
• Are there clearly defined and
enforced policies and
procedures?
• When is the last time you
updated/clarified PPMs?
• It won‟t get done without these
things……
• Have systems/software/grants
changed?
• If you are thinking of being
CARS rated you will need this
done!

15. As for the Loan Review Committee…
• We have seen Loan Review
Committees where the
Underwriter votes.
• We‟ve also seen Loan Review
Committees where the ED and/or
the Director of Lending votes.
• I have a strong opinion that
neither of these is appropriate to
a shop that has good governance
rules and clear lines of authority
and accountability.

16. Is Your Collections Process Getting
The Results You Want and Need?
• Is collections still on the
lenders‟ desks?
• Is there a clear procedure for
delinquencies?
• Do you have a policy for the
sequencing of letters/calls?
• Do you know when to send to
“legal”?
• Do you employ pro-bono legal
help?

17. Augment Portfolio Risk Management
• Do you have a portfolio quality
review process that allows senior
management and the Board of
Directors to adequately manage
the risk present in the portfolio?
• Analytical tools to monitor
identified risk areas in the
portfolio.
• What reports do they review and
how often?
• Do they track areas you know to
be risk areas in the portfolio?

18. Loan Loss Reserve Policies
• Do you have a written policy?
• A solid LLR policy reserves
against risk, not simply
delinquencies
• Do underwriting guidelines align
with risk profiles of loans?
• The “old days” are over.

19. Develop a Robust Technical
Assistance Program
• Solid, well-deployed and
implemented TA is your best
risk mitigation strategy in
tandem with solid underwriting
guidelines.
• Does your TA program align to
your organizational goals for
supporting entrepreneurs?
• Does your post-closing TA
program support the portfolio?
Performance?
• How do you know?

20. Develop a Robust Technical
Assistance Program
• Are lenders still primarily responsible for post-closing
TA?
• Do you have good systems for capturing all the TA
hours provided to your clients?
• Is it a marketing tool to tell entrepreneurs about
educational opportunities – ONLY?
• What skills do TA folks need; what skills do your folks
have?

21. Grants Management System
• My question to our clients is this:
Is your grants management
system re-active or pro-active?
• A complete Grants Management
System starts before a grant
application is ever written.
• Input from program staff before
an application is written to
determine scope and
deliverables.

22. Grants Management System
• Education of program staff on deliverables
• Responsibilities/accountability
• How deliverables will be tracked/reported
• How the accounting staff will report out the financials
• Calendaring of reports
• Tracking and feedback to front-line staff on status

23. What
organizational
capacities and
skills do the best
microlenders and
CDFIs represent?

24. Loan Fund Staff
• Determine the financial viability
of a small business loan request.
• Underwriter‟s 4 Questions
• Credit Analysis
• Qualitative Analysis
• Read and understand income
statements, balance sheets, and
cash flow statements.
• Understand the components of
problem loan management.

25. Organizational Capacity
• Loan Fund Policies and Procedures
• Underwriting Guidelines
• Loan Fund Software
• CRM
• Outreach Strategy
• Technical Assistance
• Portfolio & Risk Managementtt

26. Time for some remodeling?

27. Loan Fund Assessment
• Complete review of practices, policies and procedures,
and systems.
 Marketing and Outreach Strategy
 Staff Skills and Responsibilities
 Lending Policies and Procedures
 Product & Underwriting Guidelines
 Analytical Model & Credit Memo
 Portfolio Risk Management
 Delinquency Management System
 Post-Loan Technical Assistance
 Client Impact Tracking
 Capitalization Plan
• Interviews, site-visit and in-depth findings,
recommendations, and action plan.

28. More investors require CDFIs to:
 Produce positive financial returns
 Produce data that demonstrate
long-term impacts
 Become more sophisticated in data
collection and impact reporting
 Become CARSTM-rated

29. What Is CARSTM?
 The CDFI Assessment and Rating System is the
industry‟s independent, third-party rating of impact
performance and financial strength.
 A CARS™ assessment includes past performance,
current financial position, and risk factors in the
future. Ratings are based on five years of historical
performance.
 With CARS™, investors have enhanced transparency,
experience greater efficiency, and make smarter
investments. Leading community development
finance institutions CDFIs are rated.

30. Disclaimer
• Friedman Associates has no affiliation with CARS™ Inc.
• Advisory services are provided to CDFIs without
consultation with or benefit to CARS™ Inc.
• Our reference to the CARS® brand does not imply
endorsement of our services by CARS™ Inc.

31. • CDFIs that are CARS rated receive two performance
ratings:
 financial strength
 impact performance
• CARS measures the extent to which a CDFI is having
the impact it sets out to accomplish, including the
institution‟s capacity to measure impact, and use
those measures to improve performance.

32. Financial Strength and
Performance
Creditworthiness: CAMEL Analysis
Capitalization
Asset Quality
Management
Earnings
Liquidity

33. Management: 25% of Score
 Strategy
 Governance
 Management and staffing
 Infrastructure and
 Management information
systems

34. • Alignment of strategy and operations
• Effective use of financial resources
• Tracking of outputs that show effectiveness
• Tracking of outcomes or impacts that show
effectiveness
CARS™ Ratings and Scale
Impact Performance

35. What is Prep My CDFI?
• A process to prepare you for CARS™
• We assess your readiness for the rating
process.
• We identify the gaps and weaknesses.
• We advise and help you on how to fill
„em!
• We prepare you for the CARS™ site visit.
• We put you in the best shape to get the
rating you deserve!

36. Let‟s Take Your Questions!

37. Contact
Jason Friedman, Principal
Friedman Associates
319-341-3556
jasonj@friedmanassociates.net
www.friedmanassociates.net