One of the nation’s leading nonprofit community development financial institutions (CDFI) , IFF invests in communities by helping nonprofits plan and build facilities critical to their mission and success. Since our founding in 1988, we have extended our reach from our home base in Chicago to communities in central and southern Illinois, as well as to Indiana, Iowa, Missouri, Wisconsin and Kansas.

Our geographic build-out has been measured and deliberate. Our first step was to reach more broadly into Illinois from Chicago. It was not until our loan portfolio matched the distribution of nonprofits throughout the state did we consider moving further. We then looked to neighboring states that were home to a substantial number of nonprofits who we determined would benefit from our services. We also studied the existing availability of CDFIs or local banks offering similar financing, the culture of the business and philanthropic communities and the level of engagement in community development.

We engaged community leaders in our targeted markets, met with potential borrowers, philanthropic leaders, private sector executives and government officials, as well as potential collaborators, such as other CDFIs. The conversations served a dual purpose, in addition to providing market research, they also provided an opportunity to gain the trust of the local community and gauge the need for our products and services.

Our experiences with expansion have helped us to more clearly understand how institutions and places interact.. The history, culture, infrastructure, politics, leadership and specific unmet needs in each locale can inform how community investment functions and how new institutions can grow or expand to serve them. Here is some of what we have learned:

Start close to home.
Entering new markets is easier when they are adjacent to an existing service area, or where there are pre-existing relationships. Advantages include lower costs of travel, easier monitoring, and more familiarity with a place that is relatively close. For example, IFF had already successfully funded some projects in St Louis and Milwaukee prior to expansion.

Don’t duplicate existing programs.
From the outset, our goal has always been to identify and fill gaps in new markets. As a non-local entity, we have found the easiest way to expand into a community and build the trust of key partners is to identify an unmet need that local stakeholders agreed needed to be filled. In Milwaukee, we engaged in research and local policy advocacy around charter school development and financing. Our experience in charter school lending, where there was little local capacity, created a niche that we could fill while also building-out our local capacity and gaining trust in the market.

• Partner with existing organizations when you can.
Engaging leaders in many sectors facilitates local buy-in and raises IFF’s profile with potential clients and partners. In St. Louis, for example, our challenge came in the form of a comparatively underdeveloped community base. St. Louis County is home to 91 municipalities and within the city itself, there are 28 wards. The region’s fragmented system for distributing resources seemed to encourage competition rather than cooperation. One result was a larger number of small organizations unable to achieve the scale of assets and expertise required to complete large scale community investment projects. At the recommendation of several people in the community, we partnered with the United Way of Greater St. Louis. The relationship enabled us to tap into an extensive network of community and nonprofit leaders, facilitate economies of scale and create effective community investment partnerships.

• Establish a personal presence in the community.
While it may not seem cost effective to send staff into a new market until the volume of business reaches a certain level, we have found that being part of the community, from the outset, demonstrates our commitment to the community. Having staff available on a regular basis allows us to have a presence at local meetings and provides a local point person. It strengthens relationships in a more meaningful way.

• Review, reflect and adjust.

Have a strategic plan but be willing to diverge from it as needed. In Indianapolis we encountered more resistance than in Milwaukee and St. Louis. Although our meetings with community leaders and stakeholders were cordial, we had less success engaging stakeholders. We responded to the challenges in Indianapolis by adjusting our game plan. Rather than beginning with loan activity as we had in other markets, we identified a significant need for our real estate consulting services and public policy work. By matching our capabilities to areas of greater need and opening a full time office in Indianapolis, we positioned ourselves to strengthen the critical community relationships that will ensure our continued growth.

So as we prepare to expand our operations into Michigan early next year, we know – thanks to the experiences shared here – that close community ties and geographic presence will continue to be fundamental to our success in new markets. Undeniably, our most valuable asset for guiding our future expansion will be the crucial details of what we have learned from our past expansion.

Joe Neri is IFF’s CEO

To learn more about IFF’s work, check out this paper.