3c hapter - Index of

80 Locavesting
her daughter was enrolled in. To do so, however, would cost
$600,000, with 20 percent down. Then there was rent to pay, supplies
to buy, and teachers to hire. “I have no rich family or uncle
or anything like that,” said Ramsey. She made the rounds of banks
but was rejected again and again. She had just won $25,000 in
a business plan competition when someone told her about The
Reinvestment Fund (TRF), a lender based in Philadelphia. “I told
them if they would take a risk on me, I know I can make it work,”
she recalls. The Reinvestment Fund agreed to lend her about
$300,000 (with her father as cosigner) over a 10-year term. The
interest was a reasonable 2.75 percent over prime. She scraped
together additional funds by selling her car and moving with her
family into her mother’s townhouse.
In 2001, Ramsey opened her day- care center in Skippack, Pennsylvania,
an affl uent suburb 20 miles north of Philadelphia. She
marketed it at community events and within a year turned a
profi t—well ahead of the school’s national benchmarks. A few
years later, with more demand than she could handle, Ramsey
returned to The Reinvestment Fund for another loan, this time
for $95,000 to expand into a neighboring space.
Not bad for a fi rst- time entrepreneur that banks wouldn’t
touch. But that was just Act I. Ramsey eventually began to think
about opening a school in the city, where there were fewer highquality
day- care options available. She put her school up for sale
and, after a bidding war, sold it for a million dollars, leaving a tidy
profi t even after repaying her loans to TRF.
The Reinvestment Fund is what is known as a Community
Development Financial Institution, or CDFI. These organizations
may be banks, credit unions, venture capital funds, or loan funds,
but they all share a mission of providing fi nancing to underserved
or economically challenged communities. There are 800 or so of
these entities across the country, each specializing in its region.
Although they’ve been around for years—TRF just celebrated its
25th anniversary in 2010—they have operated somewhat under
the radar. Indeed, community development fi nance may be the
biggest- impact fi nancial sector you’ve never heard of.