Glossary of Financial Terms

Capital Dedicated to Lending/Investing

Includes borrowed capital, equity capital (or net assets available for lending), equity equivalent capital, shares, deposits, and secondary capital. Include all unrestricted net assets and include drawn (but NOT undrawn) Lines of Credit intended for use as loan or investment capital.

The components of Capital Dedicated to Lending/Investing are as follows:

  • Equity for Financing

    Also referred to as net assets dedicated to lending or permanent capital at nonprofits or net capital at credit unions. It is the portion of a CDFI’s total equity that is either dedicated to or available for lending/investing. This should include all unrestricted net assets, but not include any other net assets or equity intended to fund operations.

  • Debt for Financing

    Includes all borrowed funds available for financing. Include only the drawn portion of lines-of-credits.

  • Equity Equivalent Investments (EQ2)

    EQ2 is unsecured debt that has some of the same advantages as equity because EQ2 is subordinate to all other debt, it carries a rolling term, the investor has a very limited right to accelerate payment, and the interest rate is not tied to income.

  • Deposits/Shares

    Amount of Deposits and/or Shares at credit unions or banks which are available for lending.

  • Secondary Capital

    Secondary capital is a specific type of capital used only by low-income community development credit unions. It is defined by the National Credit Union Administration as having several key characteristics, including the following: it is uninsured, is subordinate to all other claims, has a minimum maturity of five years, and is not redeemable prior to maturity.

Loans and/or Investments Originated

Includes loans, debt-with-equity and equity Investments Originated. A loan is considered originated when a legally binding note has been signed by the borrower in favor of the lender. An equity investment is considered originated when a document evidencing a commitment has been signed. If the applicant’s primary financing activity is loan purchases or guarantees, include loans purchased and guarantees made, and explain.

Delinquency Percentage

We request delinquency % for different categories depending on whether you are a loan fund/bank or credit union. Loan Funds and banks are required to submit delinquency % greater than 30 days and delinquency % greater than 90 days. Credit unions are required to submit delinquency % greater than 2 months and delinquency % greater than 12 months. Delinquency % is calculated as the dollar amount of principal outstanding on loans (or debt with equity features) that have payments (of principal and/or interest) late (by the specified time period) / total gross loans outstanding (including debt with equity features).

Net Write-Off Percentage

Net Write-Off Percentage is the net amount charged off on loans (including debt with equity) in a year divided by the gross loans outstanding (including debt with equity) at the end of the given year. Losses are reported after default, foreclosure, and liquidation and are net of any recovered assets. If any amount is reclaimed in the current fiscal year on loans that were written-off in previous years, that amount should be subtracted from the amount lost (i.e. written off) in the current fiscal year. Includes losses on any loans purchased. Does not include losses on guarantees.

(i.e. calculation for 2010 is net write-offs in 2010 / gross loans outstanding at fiscal year end 2010)