KeyCorp in Cleveland has provided a $20 million line of credit to Lendistry, a Los Angeles-based, minority-led community development financial institution. The deal represents the biggest single commitment to date for the CDFI lending group Key launched in November 2021, according to Brian Maddox, the $195.2 billion-asset bank's national team leader.
Lendistry "is the largest CDFI we've worked with," Maddox said. "It warranted our ability to leverage up and do more of an investment...Lendistry has tremendous depth to be able to work with clients and potential borrowers on multiple levels."
Small businesses aren't the CDFI group's exclusive focus, but it's a growing area of interest, according to Maddox. "We've probably invested in three or four CDFIs in the last year-and-a-half that concentrated on small-business lending."
In March, Maddox's Community Development Financial Institutions Group extended a $10 million line of credit to Boston-based Arctaris Impact Investors to support its small-business lending.
Founded in 2014, Lendistry has made more than $9.4 billion in loans and grants in support of more than 622,000 small businesses. The relationship with Key will serve as a "resume-builder" as Lendistry seeks to expand involvement in the growing State Small Business Credit Initiative and similar programs, CEO Everett Sands said.
"As the government thinks about granting Lendistry more funds and adding us to more programs, 'Can you handle it,' is a natural question," Sands said. "We can say, 'Look at what we just did with Key.'"
The line of credit also serves as a hedge against an economic downturn. "When you're entering a tightening credit market, you want to make sure you have multiple partners. I look at it as a fiduciary responsibility," Sands said.
Key is a significant small-business lender on its own, ranking among the nation's top 20 Small Business Administration 7(a) lenders. Through July 5, Key had closed 665 7(a) loans for $168.3 million, according to SBA. (Under 7(a), SBA guarantees small-business loans made by banks and other participating lenders.)
Lendistry can help Key reach businesses that don't fit into a conventional bank credit box, even with a credit enhancement, Sands said. Sands cited airport vendors, startups and businesses that sell through Amazon.com as examples. "There are several deals that we do in the CDFI world that don't necessarily meet the standardized traditional lending" parameters, Sands said.
According to Maddox, Lendistry has been on Key's radar for some time. "As we started to identify opportunities across the country and kept hearing Lendistry is involved in this, or Lendistry was involved in that, it only made sense to learn a little bit more about what they were doing," he said.
Maddox characterized the $20 million line of credit, first announced last month, as an opening act in what he believes will grow into a deeper, ongoing relationship. "This fits squarely into the charge we have as a CDFI lending platform," Maddox said. "It certainly helps with our [Community Reinvestment Act] commitments, but also it's the right thing for us to do."
"I see big things for Everett and his team in the future," Maddox said. "We want to be able to help provide capital for that growth. It started [with the line of credit] but we believe it will be a lot larger in the near future."
While Key has received 10 outstanding ratings on CRA exams, some community groups have asked regulators to investigate how well the company complied with a $16.5 billion-asset community benefits agreement negotiated as part of its 2016 acquisition of the $40 billion-asset First Niagara Financial Group. In May, Key
