To be eligible to receive an investment, borrowers must meet the social impact criteria as well as demonstrate the ability to repay the investment in a timely fashion.
Borrowers must be duly incorporated organizations. Ordinarily this would be a non-profit organization with a charitable purpose. The Fund does not lend to individuals.
Social Impact Criteria:
- The borrower’s governance board is at least 50% women. In addition, the board, management, and staff reflect the racial, ethnic, and cultural composition of the beneficiaries and community being served.
- The organization/project targets resources to the economically poor, especially women and children.
- The organization/project demonstrates stewardship of the land, water, air, and other resources.
- The organization/project meaningfully solicits input from beneficiaries, incorporating their voice and experience in planning, implementation, and evaluation.
- The organization/project creates alternative and equitable approaches to producing goods and services (such as cooperatives, land trusts, and social enterprises).
- The borrower seeks to effect systemic change for social and environmental justice.
Types of Investments
The investments may lack preferred investment characteristics such as market rates of return, or liquidity; however, preservation of principal is important. The types of investments include:
- Direct Loan: Low interest loan between the Fund and borrower. Examples of borrowers would be other non-profit organizations.
- Intermediary Loan: A loan between the Fund and a non-profit organization that lends to other non-profit organizations. Examples of intermediaries would be loan funds, credit unions, and development banks.
- Linked Deposit: Below market rate deposit by the Fund in a community development financial institution that decreases the interest rate and helps the financial institution to make small business and housing loans to revitalize communities.
- Equity Capital: Investment in stock in a community development bank or other types of alternative economic enterprises.
Amount, Rates, Terms
- The minimum term is one year. The maximum term is 5 years.
- The interest rate is below market rate and is determined using the financial objectives of the Fund and the request of the borrower. The minimum interest rate for any loan will be 1%.
- Ordinarily the maximum loan amount to any one organization will be 5% of the fund’s assets.
- Loans made directly to non-profits will be required to pay interest at least quarterly. Semi-annual and annual interest payments for certificates of deposit (linked deposits) and pooled loan funds (intermediaries) are permissible.
- Borrowers may use the investments to leverage other funding.
- Collateral is not required, but is desired when available.
- Current borrowers may request loan renewals. To request a loan renewal, the borrower must be current on the outstanding loan and submit a written proposal for review.
- For monitoring purposes, an independent audit and a report, which describes the social impacts of the borrower, are required once a year.