South Carolina Community Loan Fund (SCCLF) has received a $350,000 Equity Equivalent (EQ2) Investment through the CDFI Community Investment Fund, a joint initiative by Woodforest National Bank and the Opportunity Finance Network (OFN). SCCLF is one of the first organizations to receive an investment through the fund and will leverage the funding to increase lending for the development of affordable housing, healthy food enterprises, community facilities, and community businesses in South Carolina’s underserved neighborhoods.
What is an EQ2 investment?
An EQ2, or Equity Equivalent investment, is a finance mechanism that allows investors like Woodforest Bank to support the lending activities of CDFI’s like SCCLF. Unlike traditional investments, EQ2 investments behave like equity on a balance sheet, thus improving an organization’s financial strength. EQ2s are long-term investments that are deeply subordinated, meaning the investor willingly takes a backseat to other debts.
How does an EQ2 investment help South Carolinians?
An EQ2 investment allows SCCLF to increase our debt capacity, which in turn increases our ability to lend money. The EQ2 also increases risk tolerance and thus lending flexibility, meaning that this investment will put SCCLF in a position to approve loans in communities where the need for capital is greatest.
Woodforest National Bank’s EQ2 investment will impact SC communities by facilitating SCCLF’s capacity to lend where it is most needed while also attracting additional investments. Cassandra Archbold, Senior Vice President, Financial Services at OFN, said in response to the EQ2 announcement, “We know how precious a role equity equivalent capital plays on a CDFI’s balance sheet and we expect SCCLF may be able to attract additional debt capital because of this transaction. We are enthusiastic about the financial and social impact of SCCLF and eager to hear the success stories that result from the investment.”
Through the CDFI Community Investment Fund, Woodforest National Bank has committed a total of $5.5 million in EQ2 investments to support CDFIs financing community development projects and small businesses in their 17-state region.
