What Are the Different Types of Community Development Loans?

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  • Written By: Helen Akers
  • Edited By: Jessica Seminara
  • Last Modified Date: 12 September 2019
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Community development loans help individuals and businesses enhance and elevate the general quality of life in economically disadvantaged cities. Some of the major types of community development aid include home ownership loans, funds for advocacy and education programs, and public utility development. Other common types include business loans and concessions. The primary focus of these types of aid is to encourage the development of rural locations that may not be as attractive as larger cities.

Several community development loans attempt to give low-income individuals and families access to affordable housing. Most of these programs help make home ownership a possibility for those who may not have adequate income or savings. Some of them allow families to substitute manual labor for a portion of the down payment amount. These loans and funding programs cover the costs of financing a home purchase and provide extra guarantees to lenders.

Some housing assistance comes in the form of rental assistance or government subsidized payments to prevent homelessness. Public housing developments and subsidized rental communities also help give residents affordable alternatives to substandard housing conditions. Subsidized rental communities are typically built to the same standards as more expensive complexes, yet offer a below market rental rate. The government provides the community owners with a kickback payment and income restrictions may apply to potential residents.


Community development loans are also provided to businesses to encourage building and expansion. Tax incentives and other forms of financial aid may be offered to companies that consider rural community locations for plants and offices. These loans help ensure that local residents have access to quality jobs and do not have to move or commute to seek gainful employment. Another type of community development assistance aimed at businesses encourages the development of social assistance programs, such as financial education and public facilities.

One of the concerns in a rural or poverty stricken community is the lack of community resources. Economic development incentives also encourage medical facilities, libraries, school districts, colleges, and recreation centers to locate in targeted areas. Educational programs that teach residents financial planning, job search skills and life development skills are of prime interest to community planners.

Public utility companies can also be the target of community development loans. Funding assistance is given to electric and gas companies to upgrade, sustain or build adequate utility networks. Remote communities may be in need of proper plumbing, cable television and adequate levels of electricity. Community development loans can help utility companies offset some of the expenses associated with building new facilities and extending existing networks to otherwise unfeasible locations.


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