Secondary Capital I Loans
Secondary Capital I and Secondary Capital II loans are subordinated, long-term debt available to credit unions with low-income designation from their regulator. Although they are loans, secondary capital counts as net worth for regulatory purposes. Secondary capital can be leveraged by growing CDCUs to expand safe and affordable lending to local communities.
The Federation offers two types of secondary capital loans products — Secondary Capital I which includes an expected balloon repayment of principal, and Secondary Capital II, which includes expected repayments of amortized principal.
Secondary Capital I: Eligibility
Federation member credit unions with low-income designation that meet our general Eligibility Criteria are eligible to apply for Secondary Capital Loans.
Secondary Capital I: Terms
The Federation makes secondary capital loans of up to $500,000 with maturities of 5-7 years. Interest rates range between 5% and 6%. Per regulatory guidelines, at the outset of a Secondary Capital Loan, the entire principal of the loan can be counted toward net worth. In each of the last 5 years of the loan term, the amount of the loan that can be counted toward net worth reduces by 20%. In the last year of the loan, the entire loan principal is booked as a subordinated loan and can no longer be counted as net worth.
Secondary Capital I: How to Apply
Download and complete the Secondary Capital I application form and submit with required documents and application fee to the Federation per provided instructions. Applications for Secondary Capital I are accepted on a continuous basis, but are considered for approval only at the triannual meetings of the Community Development Investments Committee.