Financial Institutions (2025)

A lending program begins with a financial institution that procures the funds it lends from a number of other sources.

Types of financial institutions include:

  • Banks
  • Credit unions
  • Community development financial institutions
  • Utilities
  • Government lenders
  • Specialized lenders.

Banks

These can be large national banks (Wells Fargo or Bank of America), regional or super-regional banks (U.S. Bank or Fifth Third Bank), or banks that operate in a geographically defined area (the National Bank of Arizona or the Bank of Colorado). The latter tends to be more closely entwined with their communities than the larger banks. For that reason, geographically defined banks may be the most attractive to state and local governments, despite the fact that those banks lack the broad reach and large number of branches (convenient access for home and business owners) of the large national or super-regional banks.

Any bank that focuses heavily on mortgage lending will be accustomed to closing loans that are well above $100,000, which they, in turn, sell to a secondary market investor. Banks are also familiar with home equity loans and home equity lines of credit through which consumers borrow money and the banks place a lien as security on the homeowner's primary residence. Those large, secured mortgage loans are quite different from the small consumer-oriented unsecured loans that in many cases support energy efficiency retrofits in homes. The bank departments that are most likely to be comfortable with unsecured residential clean energy lending programs are the consumer finance departments that work with unsecured lending. One national bank, EnerBank, now specializes in clean energy loans for consumers.

Larger loans that might rely on home mortgage refinancing, home equity loans, or energy efficient mortgages are typically housed in a separate department dealing with home mortgages. Commercial lending, on the other hand, often falls into a different department altogether. Not all banks that make home mortgages or do consumer financing also do commercial lending. Learn more about financing program market segments.

Credit Unions

Credit unions are nonprofit organizations with a charter to serve the financial needs of specific parts of a community, whether it is an employer group, a group of graduates of a particular university, or some other defined group of people. Examples include the State Employees Federal Credit Union in New York or the Navy Federal Credit Union. Like the community banks mentioned above, credit unions tend to be highly community focused, but in some cases they lack the broad geographic reach of a large national or super-regional bank. Credit unions typically focus on lending as a way to support the community or members for which they operate. Many credit unions already do small consumer lending—used car loans offered through used car dealers, for example. Credit unions are often very well-suited candidates for clean energy lending with which state and local governments should seriously consider developing partnerships.

Community Development Financial Institutions

Community development financial institutions (CDFIs) are nonprofit financial institutions that aggregate lending capital from a mix of federal or state government, foundation, and private capital sources and relend that money to targeted groups. Some CDFIs target their lending to small businesses, others target lending to nonprofit institutions, and a very small number of CDFIs target lending to the residential single-family sector. These financial institutions typically operate small offices with only a few staff and tend to make loans (usually larger than $100,000) to organizations that cannot secure lending from banks or credit unions. CDFIs can be ideal partners for state and local governments because of their community-based missions. Governments should bear in mind that CDFIs tend to be both capital and capacity constrained; the capacity constraints often mean that they do not have the staff to process the large numbers of small loans that are common in the single-family residential sector.

Utilities

Utilities can be financial institutions, but are often reluctant to serve in that role. Their reluctance stems from three concerns: (1) legal and regulatory requirements related to serving as a lender, (2) the cost of developing computer systems to handle principal and interest payments and collections, and (3) any financial liability they may incur as a result of making and holding loans. Some utilities do, nonetheless, offer clean energy lending programs, primarily serving commercial borrowers. Learn more about financing program market segments.

Government Financial Institutions

Government financial institutions can include state energy offices, state-chartered finance authorities, or their local government equivalent. Many of the first generation clean energy lending programs from the late 1980s and early 1990s began with government financial institutions. As a rule, most government financial institutions are capacity constrained in the same way as CDFIs and have limited ability or desire to originate and service loans—particularly small residential loans.

Specialized Financial Institutions

A number of specialized financial institutions operate in the clean energy lending space. These nonbank finance companies have access to capital from a variety of sources. Examples include the three Fannie Mae-qualified clean energy loan program financial institutions (AFC First, Viewtech, and Energy Finance Solutions) and the Electric & Gas Industries Association.

Review the roles ofPartners and Stakeholders of financial institutions in more detail.

Financial Institutions (2025)

FAQs

What does it mean when they ask for financial institution? ›

The definition of a financial institution typically describes an establishment that completes and facilitates monetary transactions, such as loans, mortgages, and deposits. Financial institutions are a place where consumers can effectively manage earnings and develop financial footing.

Why is it important to financial institutions? ›

Why Are Financial Institutions Important? Financial institutions are essential because they provide a marketplace for money and assets so that capital can be efficiently allocated to where it is most useful. For example, a bank takes in customer deposits and lends the money to borrowers.

What are the 3 financial institutions? ›

They are commercial banks, thrifts (which include savings and loan associations and savings banks) and credit unions. These three types of institutions have become more like each other in recent decades, and their unique identities have become less distinct.

What are the 7 major types of financial institutions? ›

The major categories of financial institutions are central banks, retail and commercial banks, credit unions, savings and loan associations, investment banks and companies, brokerage firms, insurance companies, and mortgage companies.

What are some examples of financial institutions? ›

Types of financial institutions include:
  • Banks.
  • Credit unions.
  • Community development financial institutions.
  • Utilities.
  • Government lenders.
  • Specialized lenders.

How do I know my financial institution? ›

How do I find my institution and/or transit number?
  1. Option 1: Look at your checkbook. ...
  2. Option 2: Log into your internet banking. ...
  3. Option 3: Find the Institution number in the list below. ...
  4. Option 4: Routing Number. ...
  5. Use Wise, Save Money.

What services do financial institutions provide? ›

Before you head to a bank or credit union, learn the basics about the products and services they offer.
  • Checking Accounts. An account at a financial institution that allows for withdrawals and deposits. ...
  • Savings Accounts. ...
  • Money Market Accounts. ...
  • Certificates of Deposit. ...
  • Mortgages. ...
  • Home Equity Loans. ...
  • Auto Loans. ...
  • Personal Loans.

What is the difference between a bank and a financial institution? ›

The non-banking financial institution which comes under the category of financial institutions cannot accept deposits into savings and demand deposit accounts. A bank is a financial institution which can accept deposits into various savings and demand deposit accounts, and give out loans.

What is the conclusion of financial institutions? ›

In the resolution of financial institutions, a principal goal is to preserve financial stability and minimize economic and social effects in states where the institution or financial institution group operates.

How do financial institutions work? ›

Banks are privately-owned institutions that, generally, accept deposits and make loans. Deposits are money people leave in an institution with the understanding that they can get it back at any time or at an agreed-upon future time. A loan is money let out to a borrower to be generally paid back with interest.

How do financial institutions make money? ›

Banks make money by imposing service charges on their customers. These fees vary based on the products, ranging from account fees (monthly maintenance charges, minimum balance fees, overdraft fees, and non-sufficient funds [NSF] charges), safe deposit box fees, and late fees.

Who regulates financial institutions? ›

There are numerous agencies assigned to regulate and oversee financial institutions and financial markets in the United States, including the Federal Reserve Board (FRB), the Federal Deposit Insurance Corp. (FDIC), and the Securities and Exchange Commission (SEC).

Who pays interest on a loan? ›

The interest rate is the cost of debt for the borrower and the rate of return for the lender. The money to be repaid is usually more than the borrowed amount since lenders require compensation for the loss of use of the money during the loan period.

What are the advantages of financial system? ›

They enable individuals and institutions to save, invest, manage risks, and conduct transactions efficiently. Financial systems also play a role in price discovery, ensuring fair prices for assets and commodities. They contribute to economic stability, support monetary policy, and help regulate financial activities.

Why do people use banks? ›

Although banks do many things, their primary role is to take in funds—called deposits—from those with money, pool them, and lend them to those who need funds. Banks are intermediaries between depositors (who lend money to the bank) and borrowers (to whom the bank lends money).

Does financial institution mean my bank? ›

Financial Institution - A "financial institution" includes any person doing business in one or more of the following capacities: (1) bank (except bank credit card systems);

What does financial institution mean for direct deposit? ›

The term direct deposit refers to the deposit of funds electronically into a bank account rather than through a physical, paper check. Direct deposit requires the use of an electronic network that allows deposits to take place between banks. This network is called the automated clearing house (ACH).

Is a bank a financial institution? ›

A bank is a financial institution licensed to receive deposits and make loans. There are several types of banks including retail, commercial, and investment banks. In most countries, banks are regulated by the national government or central bank.

Is there a difference between a bank and a financial institution? ›

Banks are financial institutions that are licensed to provide loan products and receive deposits; non-banking institutions cannot do this. Financial services include insurance, the facilitation of payments, wealth management, and retirement planning.

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