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What Are the Different Methods of Community Development Funding?

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  • Written By: Laura M. Sands
  • Edited By: Heather Bailey
  • Last Modified Date: 06 September 2016
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Community development (CD) funding occurs primarily through grants, loans and the issuing of municipal bonds. In many instances, funding made available for community development programs has been deliberately set aside for grant and lending purposes. In order to access these types of community development funding, however, a formal request usually must be made through either a loan or a grant application process.

Plans to sustain communities are generally supported by community development groups focused on things like economic development and establishing community policies. Governments and private businesses with an interest in supporting these community planning efforts often establish special funds for this express purpose. Some are established as grant programs, while others are offered as loans.

Often, community development funding is awarded by a government directly to an area’s official community development group. In turn, the group sometimes establishes its own grant fund and invites those with an interest in supporting the CD group’s goals to apply for a portion of those funds to facilitate special programs for things like housing and urban development. Organizations like schools and social institutions often apply for these types of grants to better serve the communities where they are located.

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Funding may also be granted directly from businesses that operate in a community. Most businesses offering community development funding are large corporations that have established special funds for charitable giving in a particular area. This type of funding is often given directly to pre-selected nonprofit organizations or may be offered to a group in an effort to establish a community policy that will benefit a business' core customer base.

Loans are another method of community development funding. Banks and private lenders will sometimes extend loans to individual community development programs. Often, this type of community development funding is used to facilitate large projects, such as remodeling a civic center or building a new freeway system. Projects of this scale are often funded by multiple grant and loan programs in order to secure enough capital to support a timely completion.

Municipal bonds are also sometimes created for the community development funding of large scale projects. These are only issued, however, by government-run community development groups. Investors purchase a municipal bond with the expectation that the bond will mature over a set period of time after which it will be repaid. During that time, however, this type of community development funding is utilized by a group to carry out a community’s building and improvement efforts.

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