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Evaluating impacts of a CDFI

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TCRI

Hello, we are going to evaluate the impacts of a CDFI. I believe we have a good approach, but wanted to 1) make sure we are correct and 2) ask a few questions. Here is an example and our approach:

Let's say our CDFI made one loan in 2020 for $10,000,000 to fund new building construction of a doctor's office (code 50) and one loan in 2022 to a motor vehicle retail company (industry 402) for $500,000. We want to evaluate the overall impact our CDFI in a specific state. 

So, we need to look at each project that the loan was made, understand as much as about the loan recipient as possible, run the impacts for all projects in the dollar year that the loan was made, then combine years and projects for an overall impact.

For the 2022 loan, we would run an industry impact analysis (detailed) to determine the impact of the retail company.. Questions:

  1. Ideally, I believe we want to know as much as possible, eg employment, compensation, income, inputs etc.
  2. What if we dont know much, if anything, about the company, other than the loan amount? use a capital investment spending pattern?
  3. Either way, is there anything additional we should be analyzing?

For the 2020 loan:

  1. Technically, there are two impacts to evaluate:
  2. First, the impacts of the construction, which we would run as an industry output event, and/or if machinery, tech, and FFE need to be analyzed, then would need to run an investment spending pattern
  3. Second, we would analyze the doctor's office operations that moved into the new building. So, we would then run an industry impact (detailed), just like the 2022 loan.
  4. Lets say the construction occurred in 2020, but was not completed until Dec 31st 2021, and the doctors office did not start operations until July 1 2022. 
  5. For construction over multiple years, follow these directions: https://support.implan.com/hc/en-us/articles/360040512733-Construction-Building-Across-Years 
  6. For only 6 months of doctor office operation. run the (detailed) analysis and divide by half??

Thank you very much!!

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    Michael Nealy

    Hello again!

    I'll answer the questions in the order in which you have posed them:

    Regarding the 2022 Loan:

    • I'm not entirely sure what exactly you are trying to model here. You say that they will receive a $500k loan, but what will the motor vehicle retail company do with these funds? Will they use them to expand the business facilities? Will they be used to fund additional employment? These are the kinds of questions you will need to answer before we can decide how to model the dollars in IMPLAN. If they will strictly be used for capital investments, you could model them as an Investment Spending Pattern. It is kind of a stretch to say that the company would not exist in this Region had it not been for this loan, which is what you would need to assume in order to say the annual operations are the impact of this $500k loan. If you can assume this reasonably, you would probably want to consider an Industry Contribution Analysis Event Type to input the value of operations that will be supported by this loan.

    Regarding the 2020 loan:

    • Points 1 and 2 are good here. For 3, like mentioned above, you would have to be able to assume that the operations would not have occurred in the Region had it not been for this loan (for example, think of a new business that came into the Region because of the loan, or one that would have had to relocate if not for the loan) in order for these operations to actually be an impact to the Region. I think you got 4 and 5 down, I would just note that if both of the construction values you have are in the same Dollar Year values (say both are in 2020 dollars), that you do not need to set up multiple Groups to parse out the construction Events, but be sure to report that the construction occurred over two years from 2020-2021. The article you linked is going to be a huge help here. Lastly, for 6, if this is simply what the total operation value is over the last 6 months of 2022, and you want to report the results of only these operations, then there is no further calculation to be made, just note that these Results only represent the operations of the business from July-December (not the full year). If you want to see what the results would have been given this 6 month value over a full year, you would multiply the results by 2, essentially doubling the operations to account for a full year. 

     

    Hope this helps!

    Michael Nealy

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    TCRI

    Indeed it does help, very much so. Exactly what we needed thank you!

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