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The basics:

• CDFIs provide financing for businesses unable to secure conventional bank loans
• Programs offer small business loans, mentorship and technical support
• Entrepreneurs used CDFI funding for equipment, acquisitions and property purchases
• Demand for alternative financing continues to rise across New Jersey

Java’s Compost owners Java and Michelle Bradley had a clear business mission: reduce food waste by collecting residential and commercial organic materials and transforming them into usable compost. But in 2024, they needed $30,000 for an additional truck to accommodate their growing collection services.

A conventional bank loan wasn’t in the cards for the young entrepreneurs, though. So they turned to Newark-based GNEC, a nonprofit lender built exactly for businesses like theirs.

“As a Community Development Financial Institution, GNEC approaches lending differently than traditional financial institutions,” said GNEC Development & Communications Director Khady Ndiaye Copeland. “Rather than relying solely on credit scores, we focus on understanding each entrepreneur’s unique circumstances and identifying ways to help those who may have difficulty accessing capital through traditional means. Our goal is to nurture entrepreneurs and support them in securing the funding they need to build and grow economically stable businesses.”

Funded by the U.S. Treasury Department, CDFIs are mission-driven financial institutions that take a market-based approach to supporting economically disadvantaged communities.

In the case of Java’s Compost, GNEC stepped in with financing through its DreamMaker Loan program, which provides between $5,000 and $30,000 to small business owners — potentially with no collateral required. “No home. No property,” Copeland detailed. “No assets on the line. Many small business owners come to GNEC because they may not yet qualify for traditional bank financing. This could be due to limited credit history, being early in their business journey, or needing smaller loan amounts.”

Support services

That uncollateralized structure is a deliberate design choice. For early-stage or underbanked entrepreneurs, the requirement to pledge personal assets is often the wall that stops them cold, she added, noting that Java’s Compost wasn’t an isolated success story.

“EROS Healthcare Services, founded by Dr. Karleen Kemp, also accessed GNEC capital to strengthen operations and continue delivering home-based health care and wellness support to its community,” according to Copeland. “Eros chose not to pursue a traditional bank loan because, as a new business, Dr. Kemp did not yet meet the typical qualifications required by conventional lenders. Beyond access to capital, she was also looking for wrap-around support services to help guide her growth.”

In 2021, “Eros secured $50,000 through GNEC and has remained actively engaged in GNEC’s programs,” added Copeland. “Through this support, Dr. Kemp has taken advantage of technical assistance, including business planning and ongoing advisory services, which have played a critical role in helping her strengthen and grow her business.”

What separates GNEC from a straightforward lender is what happens after the check clears. “Many borrowers also participate in GNEC’s BackStop Program,” said Copeland. “This is a structured support initiative that pairs business owners with specialists in bookkeeping, QuickBooks setup, website development, branding, social media marketing, credit coaching, and business certifications.”

Many small business owners excel at their craft “but may need additional support managing the administrative or financial side of their business,” she added. “BackStop helps close that gap.”

‘Survival tools’

The program runs over several months, giving clients time to build the systems. GNEC is also piloting new programs focused on sales growth and financial advisory support, with advisors helping owners sharpen their sales strategies while also tending to their long-term personal financial health.

Copeland noted that GNEC works to keep borrowing costs down through interest rate buy-down funds raised from partners and philanthropic supporters — an active fundraising effort that translates directly into lower rates for borrowers.

“Demand remains strong,” she detailed. “Rising costs and shifting market conditions are pushing more business owners to seek organizations that offer both funding and guidance. Increasingly, owners are also recognizing that strong bookkeeping, marketing and operational systems aren’t optional — they’re survival tools.”

Clients typically find GNEC through referrals from banks, chambers of commerce, community organizations, or through GNEC’s own workshops, webinars and pitch competitions, according to Copeland. “Our goal is to ensure that small business owners have the support they need not just to start a business, but to build a sustainable one,” she said.

A more flexible approach

Other entrepreneurs have also tapped into community development financial institutions. Last year, when Lindsey Anderson and Christopher Zindel sought to acquire Acu-Print, a digital print shop in Vineland, they attempted to secure a $130,000 business loan but were unsuccessful in qualifying for traditional bank financing.

“Although they were purchasing a successful business with a 30-plus-year history, banks considered Lindsey and Christopher to be a startup,” said Denise Jackson, executive director of the Cumberland Empowerment Zone Corp., which has received CDFI funds. “Because they did not own the business’s real estate, they were unable to obtain financing through conventional lenders.”

But the CEZC took a more flexible approach. It approved a 15-year loan at a fixed interest rate of 6% to support the purchase of the business and continue building on its long-standing legacy.

“The CEZC plays an important role in supporting small businesses and entrepreneurs throughout Cumberland County,” said Jackson. The organization administers a variety of loan programs and assists both startup and existing businesses by providing access to financing and resources that help local entrepreneurs start, strengthen and grow their businesses.

Additional assistance

In addition to its lending programs, CEZC offers free one-on-one business counseling and technical assistance to entrepreneurs at various stages of their development. The organization also hosts free workshops open to anyone interested in starting or expanding a business.

“Through these services, CEZC works to equip local business owners with the tools, knowledge, and guidance they need to succeed while continuing to strengthen the region’s business community,” added Jackson “That support has helped many local entrepreneurs turn their goals into reality.”

When local businesses succeed, our entire community benefits.
– Denise Jackson, executive director, Cumberland Empowerment Zone Corp.

“We are incredibly grateful to the Cumberland County Empowerment Zone for their invaluable support in helping us secure funding for our business,” the Acu-Print owners said in a testimonial. “We truly could not have done it without the guidance and dedication of Denise Jackson and her amazing team.”

“Demand for our loans and business counseling services continues to be strong,” said Jackson. “Our goal is to support entrepreneurs and help small businesses thrive. When local businesses succeed, our entire community benefits. Through its continued support of entrepreneurs and small businesses, CEZC remains committed to strengthening the local economy and helping business owners turn their vision into lasting success.”

A path to building equity

Another CDFI stepped in when RMC Studios owner Edward Gaub wanted to purchase the Garwood building where he had long leased space. Gaub faced a familiar dilemma for small business owners: come up with a hefty down payment or stay a renter forever.

Instead, Gaub turned to a nonprofit lender that had been in his corner since the darkest days of COVID — and structured a deal that made the numbers work. The Union County Economic Development Corp. partnered with Northfield Savings Bank to finance the $600,000 acquisition. The bank covered roughly half the cost at 6.25%, while UCEDC stepped in with $180,000 at 6% over a 25-year term, taking a subordinate lien position. Gaub contributed $120,000 — a 20% down payment that was far more manageable than the 25%–30% a conventional lender might have required.

“A lot of times we’ll look at situations where someone’s been leasing, and you look at what they pay, and then pair that to what the loan payment would be,” said Adam Farrah, president of UCEDC. “Sometimes it can be less or about the same – and as a buyer, you’re building equity –versus just paying rent and seeing that money disappear each month.”

RMC Studios serves some 475 students ranging in age from 6 to 60-plus at its 1,240-square-foot Center Street location, offering everything from piano and guitar lessons to audio engineering, music therapy and composition programs. The business employs 25 full- and part-time staff members.

Too good to be true?

The relationship between UCEDC and RMC didn’t start with this deal, Farrah said. It dates back to the early weeks of the pandemic, when UCEDC launched an emergency loan program – no collateral, 0% interest, minimal paperwork – to get cash into the hands of panicked business owners. The program opened on a Friday. By the weekend, it was fully subscribed, he added.

“People thought it was too good to be true,” Farrah recalled. “They saw the 0% and came in just to make sure we were real.”

That goodwill built a loyal client base. Since COVID, UCEDC’s loan volume has roughly doubled compared to pre-pandemic levels, Farrah said. For the RMC deal, UCEDC initially considered an SBA 504 loan — a popular product for building purchases that allows as little as 10% down.

But after weighing the fees, administrative requirements and the 504’s prepayment penalty during the first 10 years, Farrah said his team concluded their internal program was the better fit. “Sometimes the best deal isn’t even a product we offer,” he said. “We try to give solid advice, and our clients come back because of that.”

UCEDC operates across New Jersey and into parts of New York and Pennsylvania. It also provides one-on-one business mentoring, training programs and a procurement assistance center that helps companies pursue government contracts. Farrah has been with the organization for 39 years. He says the “three-legged stool” of financing, mentoring and market development is what sets CDFIs apart from conventional lenders.

He does have a word of caution: federal funding for CDFIs has become increasingly uncertain, with grants from the CDFI Fund stalled and broader cutbacks underway. “I expect some smaller CDFIs may be forced to merge or restructure.”