Strengthening nonprofits through affordable capital

byAnne Allen, Program Officer |

The economic consequences of COVID-19 have caused staggering hardship for many nonprofits. In the summer of 2020—at the height of the economic shutdown—nonprofit revenues were hit hard. Many nonprofits, including the Foundation’s grantees, faced a reduction in the provision of services—shelter, food, health care, and employment—right when the most vulnerable residents needed them most.

Although the federal government’s Paycheck Protection Program helped some nonprofits to stay afloat throughout the pandemic, others—particularly Black-led and minority-serving nonprofits—faced challenges accessing this resource, in part due to systematic inequities of distribution. And for those nonprofits that accessed the program, many still faced looming cash-flow crises despite this resource. Consider, for example, the nonprofit that got a state contract to provide shelter to individuals experiencing homelessness but is paid through reimbursement only. The organization cannot wait for the reimbursement and needs the funds upfront to quickly house people most susceptible to the virus. Many of The Harry and Jeanette Weinberg Foundation’s grantees found themselves in similar positions.

In response, the Weinberg Foundation announced $7.5 million in grants to Community Development Financial Institutions (CDFIs) as part of its COVID-19 emergency grantmaking to address nonprofit resiliency-building both during and after the pandemic. CDFIs are financial intermediaries with missions to build wealth and advance economic opportunity in low-income communities. They provide loans and financial services critical to building capacity for nonprofits such as local health centers, schools, and community centers; supporting Black- and minority-owned businesses; and expanding affordable housing options.

The Foundation is working with CDFIs to deploy more affordable, flexible loans and offer technical assistance and financial counseling. This will increase access to affordable capital for nonprofits that have been hit hard by the pandemic but have been traditionally marginalized by mainstream financial markets, specifically Black-led and minority-serving nonprofits and Native Hawaiian communities. Since the grant began in January of 2021, CDFI partners have already leveraged resources including Hawaii Community Reinvestment Corporation that made a zero percent interest bridge loan to homeless service providers, enabling them to draw down $11 million in HUD funding to house 300 unsheltered individuals on Oahu.

Partnering with financial intermediaries is a new area for the Foundation, which is eager to collaborate with its CDFI partners to gain new insight into effective grantmaking. By engaging in these new partnerships, the Foundation hopes to accomplish the following goals:

  • Strengthen nonprofits during times of financial crisis, and build long-term resiliency through financial products and services, allowing them to achieve their missions
  • Advance racial equity and inclusion strategies that reduce structural barriers for Black, minority, and Native Hawaiian communities to access capital needed to realize economic opportunity
  • Scale strategies within the Foundation’s portfolios and leverage philanthropic dollars with private and public capital that results in greater impacts in addressing housing, health, education, and workforce needs of low-income households

The Foundation’s success in breaking the cycle of poverty in the communities it serves relies on the effectiveness of its nonprofit partners and their ability to innovate. The nonprofit sector continues to face unprecedented challenges—from service delivery to funding—after more than a year of economic disruptions due to the pandemic. Through partnerships with CDFIs, the Foundation hopes to leverage borrowing capacity and financial expertise to help nonprofits emerge stronger and more effective.

For more information on this new initiative, contact Anne Allen at aallen@hjweinberg.org or Kevin Loeb at kloeb@hjweinberg.org.