Mark Ritter sits down with Eben Sheaffer on Credit Union Conversations, talking credit union lending. Eben shares his journey from Wall Street finance to CDFI leadership, explaining how working capital financing and adaptive reuse lending are reshaping underserved communities across the country. From a groundbreaking securitization in equipment financing to revitalizing Detroit through impact-driven loans, Eben reveals why credit unions hold a natural edge in accounts receivable financing for small businesses. A candid look at the K-shaped economy rounds out this insightful conversation.

What You Will Learn in This Episode:

✅ Why credit union lending gives depositories a natural edge in accounts receivable financing for small businesses.

✅ How adaptive reuse lending is helping revitalize vacant buildings in Detroit while lowering carbon impact.

✅ What the K-shaped economy means for community development and future loan demand.

✅ Why working capital financing remains the biggest unmet need for small business borrowers.

Subscribe to Credit Union Conversations for the latest credit union trends and insights on loan volume and business lending! Connect with MBFS to boost your credit union’s growth today.

TIMESTAMPS:

00:00 Eben Sheaffer shares his origin story and unexpected path into community development credit unions

05:51 Consulting work today, including equipment financing and a first-of-its-kind securitization deal

06:56 Adaptive reuse lending and revitalizing vacant Detroit neighborhoods through impact investment

10:19 Navigating volatile interest rates, inflation swings, and the realities of the K-shaped economy

13:03 Running a CDFI in New York City and competing with large banks down the street

20:56 Best opportunities ahead in working capital financing for credit unions and CDFI lenders

KEY TAKEAWAYS:

💎Credit union lending thrives when institutions lean into working capital financing and accounts receivable deals.

💎 Adaptive reuse lending offers a lower carbon path to solving housing shortages in cities like Detroit.

💎 Understanding the K-shaped economy helps credit unions serve every segment of their community, not just the top.

ABOUT THE GUEST:

Eben Sheaffer - LinkedIn

Gotham Impact Advisors - Website

RESOURCES MENTIONED:

Mark Ritter - Website

Mark Ritter - LinkedIn

SEO KEYWORDS:

Credit Union Conversations, Mark Ritter, MBFS, Credit Unions, CUSO, Credit Union Lending, CDFI, Business Lending, Working Capital Financing, Adaptive Reuse, Community Development, Neighborhood Trust, Accounts Receivable Financing, Equipment Financing, Securitization, Interest Rates, K-shaped Economy

[00:00:29] Go ahead and tell all your coworkers and colleagues all about it, and have us like and subscribe on your favorite audio platform. So joining me today is gonna be a fun conversation. It is Eben Schaffer joining me. Eben, how are you?

[00:00:47] Mark Ritter: I am doing great. I hope you're having some fun in Detroit.

[00:00:53] Mark Ritter: It's a little bit of both. Well, that's always the best kind, so as long as it becomes a tax write-off for somebody somewhere.

[00:01:01] Mark Ritter: So I always enjoy to have this podcast be more about the stories and peoples and personalities in the credit union space as much as the business side of thing.

[00:01:20] Eben Sheaffer: All right, sure thing, and I hope the internet connection here in my old hotel will, will hold out. So let's see. I grew up in Boston, and I started working in my early 20s at a bank. And I realized I had a bit of an aptitude for finance and economics, but just really wanted to do something that was more socially beneficial than just more mainstream finance, and discovered that there was this thing called, uh, socially responsible investing, and really worked towards that with a master's degree, and then moved to New York.

[00:02:24] And eventually I found the Lower East Side People's Federal Credit Union down the street on Avenue B. I just joined as a member, and a year later, I showed up to the annual meeting. I saw a bunch of financials posted on the wall. I saw they had a lot of mortgages, so probably had a lot of interest rate risk, and I volunteered for their asset liability management committee, and then I got on the board.

[00:03:20] Mark Ritter: So, uh, the most stunning part of your story is that you were a member that actually went to the annual meeting. 'Cause I have been to these meetings where there's six people sitting in the room, and it's usually the original founding members, and nobody else plans to go. Were you just, "Hey, I, I'm at this credit union and I am a member, and I'm gonna be part of the cooperative," boredom?

[00:03:54] Eben Sheaffer: Yeah, pretty much it. I mean, I was, I was r- super supportive of the credit union's mission and, [00:04:00] and wanted to help, and just kind of curious. I mean, I really didn't know almost anything about credit unions at that point.

[00:04:20] Mark Ritter: You never know. It's just the ultimate, you never know what inflection points in life and where they lead.

[00:04:46] Mark Ritter: Now, do your allegiance today stick with New England or New York?

[00:05:06] Mark Ritter: Yes. Yeah. So it's a little bit of mixed.

[00:05:10] Mark Ritter: okay.

[00:05:14] Mark Ritter: So the other things that, these are the questions that fascinate me. I come visit you in New York City, what's your favorite place you're taking me to eat?

[00:05:32] Mark Ritter: I would not have picked that in 100 years, but that's giving me something to go visit now and, and see and do.

[00:05:42] Mark Ritter: I love those. So tell people a little bit about what you've been up to since you've left Inclusive, and a little bit of, uh, y- your, your current day-to-day life.

[00:05:58] Mark Ritter: It's like The [00:06:00] Godfather.

[00:06:03] Eben Sheaffer: Yeah, the credit union industry is like that. It's like a good part of the mob. So consulting for a few different clients. Uh, one of them is a CUSO based in Alabama that does equipment financing, which is a great space for the credit unions to be in.

[00:06:45] I think this will be, you know, fingers crossed we're not there yet, but I think it will be the first securitization issuance in the equipment space for any credit union. So doing that. Also doing some work with adaptive reuse loans, [00:07:00] which is why I'm in Detroit. So buildings that are vacant or underused, underutilized, and, uh, doing rehab, especially in areas with lower incomes.

[00:07:39] So just on its own, adaptive reuse is impactful in that way. And then other work as well with credit unions and other lenders doing different participation, loan brokering, again, small businesses.

[00:07:58] That seems to be going well. [00:08:00] And, uh, yeah, with our CUSO and credit unions, and we're gonna... I think we're gonna build a little network and get, get some more people involved. So that's really, uh, really starting to roll along.

[00:08:15] But the fact that, you know, most larger lenders, banks, and others just do not want to get involved with loans of less than about $5 million just leaves a gigantic gap in the market, and there are great credits out there, great business owners that are just not being served very well. So the fact that we can look at loans that are, you know, less than $5 million and help those business owners is...

[00:08:48] Mark Ritter: No. No, not at all. You mentioned the adaptive reuse. Nowhere in this country do we have too much housing. So is that really along those lines?

[00:09:12] So there's been a lot of good public investment through Invest Detroit and my neighborhoods. There's a lot of these kind of public-private partnerships that can help provide grants and also, uh, like silent second loans, very low interest loans or forgivable loans to private developers in these lower income neighborhoods so that they can renovate older properties and get them ready to, uh, rent out.

[00:09:56] Mark Ritter: Just don't use the place from New York City where the steel beams [00:10:00] buckled.

[00:10:17] Mark Ritter: So you're a balance sheet guy.

[00:10:47] Then we decided to hike interest rates probably too late, I think the history books will say, faster than we've ever seen. Are we back [00:11:00] to a normal boring time, or, or what do you see going on out there? Are, have, have we finally tilted where things aren't gonna s- have this massive shakes anymore?

[00:11:17] But I hear what you're saying that, you know, there was, there was definitely a lot more volatility through COVID and the zero interest rate policy and then, you know, the rollercoaster ride up to, you know, wherever we were, the, into the eights. I'm talking about five or six on the short end of the curve. I think Warren Buffett said something like, you know, you pay a lot of money for certainty.

[00:11:59] Mark Ritter: I guess if we [00:12:00] knew for certain, we wouldn't be talking to each other on this podcast, so.

[00:12:24] I don't think I'd worn a mask outside in, you know, five years, but- ... uh, you need one today out here.

[00:13:03] What's day-to-day in life like running a, a CDFI in New York City?

[00:13:31] Mark Ritter: They have a branch. You have a branch. Aren't you the same thing? Yes.

[00:13:55] So that really has really stuck with me, that people just... They've got a branch, [00:14:00] you've got a branch, and they don't really care about what goes on behind the curtain, uh, as long as the service is, you know, efficient and the pricing is okay. So I think the fact that Neighborhood Trust was founded to serve the Dominican immigrant population in Upper Manhattan really gave it a, a core membership base, you know, like so many credit unions have.

[00:14:44] I mean, we were doing not only, you know, plain vanilla signature loans, but we were doing mortgages and HELOCs, and we were doing business lending and credit cards and just all of these services. I remember sometimes thinking like this, this is kind of [00:15:00] crazy, but you make it work. And I think it's really been impressive to me to watch all of these credit unions around the country with very similar stories, just making it work, giving the community a financial institution that's focused on them and with a lot of committed people who work there that make it happen.

[00:15:46] Everybody kind of supports this, but it, it has, as y- as you well know, become much more politically sensitive to the swings. A- and I don't think it was-- Was it always like that, and I just was [00:16:00] naïve? And what ca- what do you think if we named you a regulator for the day to kind of get back to where it's supported and, and everybody is kind of working on the same page?

[00:16:31] for people in their communities helping their local communities. I don't think it's controversial at all.

[00:17:04] The financing, and even just the services they need, regardless of where you're at and, and what your background is. You know, it, we can walk into any b- bank in America and get what we need when we need, but that's not the same for everybody. And, and that's how you, you know, we, I grew up very blue collar, and that's how you advance in life, is access to, uh, to capital to, to move ahead.

[00:17:29] Eben Sheaffer: Yeah, totally. And, you know, to your question earlier about, like, interest rates and inflation and stuff like that, like, I, I can't forecast that. Even the best economists, like, interest rate forecast is no better than a coin flip. The thing that I do look at more closely is, like, what often described as the K-shaped economy, and looking at how the distribution of income and wealth just continues to accelerate, and what that will do or, you know, what that's doing and will do further over [00:18:00] time to the economy, and obviously how that affects financial services and the kind of the, the loan market generally.

[00:18:22] Mark Ritter: and I think sometimes in the credit union space where I see it going is with even particularly with some newer people into the credit union space, where, hey, you know, we are a cooperative for the community, and we need to be able to support all of that.

[00:19:13] You know, everybody has to have that. So we're just not helping people at the top of that K-shaped economy, 'cause if not us, I don't know who would because those community banks are disappearing as much as credit unions. So it has to be our role, and it has to be everybody, regardless of if you're a community development credit union or not.

[00:20:04] Like, I can make them the loan to pay for it, you know, fine. I just, I wish I didn't have to make that loan.

[00:20:26] And it wasn't that much, but that's what it was in the cooperative as part of that is you were to getting a payout upon death, which, you know, it's unheard of today. It's probably not even legal today, but you- ... you could do it many years ago.

[00:20:51] I, I wish I could have done the same thing.

[00:21:08] Eben Sheaffer: Yeah, great question. One thing that I've always seen that is always a need among credit unions and, and CDFI lenders is working capital financing for businesses.

[00:21:42] Mark Ritter: we, w- we have to get off of just being a real estate lender for an apartment building.

[00:22:08] You can assess it. Also, because a credit union is a depository, that helps a lot too because you can keep the dominion of cash, the kind of lockbox-type account that other lenders, competitors can't. They don't have as much ability, m- much, as much control over the cash as a depository does. So credit unions kind of have a natural advantage in that way.

[00:22:46] Eben Sheaffer: Totally true.

[00:22:49] I appreciate your time. I love catching up with you as always. Where can people get in contact with you if they wanna connect with any of the things that you're up to today?

[00:23:09] So definitely happy to, uh, talk with anyone who's interested in working together.

[00:23:33] I appreciate your time, and I will hope to see you