Loophole lands firm a big stake.

• Position: Triangle

A Durham venture-capital partnership hopes to show banks that good works can be good business--and help them sidestep government rules. in March, SJF Ventures' third private-equity fund became the first national one to be licensed by the Small Business Administration as an Impact investment Fund. Part of an Obama administration effort to stimulate entrepreneurship, the certification requires SJF Ventures III LP to invest at least 50% of its money in companies that have a positive impact, such as clean-energy or education businesses or ones based in economically distressed areas, says David Kirkpatrick, managing director and co-founder.

Clean-tech businesses were a focus of SJF's earlier investments, so it made sense to apply for the SBA license. But it was also a necessity. The Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits financial institutions with consumer deposits from investing in private-equity firms except in special cases--an attempt to reduce conflicts of interest between banks and clients and minimize risk. The Impact Investment Fund grants banks an exemption from that regulation. Citi Community Capital, part of New York-based Citigroup Inc., announced it will be the lead investor, after putting in $15 million. All told, the fund plans to raise $75 million--$30 million...