Bridge Loans During Covid
OnePierce launched its community lending program three months before COVID disrupted 2020. Like many healthcare-related entities, OnePierce was forced to adapt its programs in response to the pandemic. The bridge loans initiative, originally envisioned as small loans to plug gaps while providers awaited grant awards, experienced a surge in demand that eclipsed our other lending activity. That demand has continued through 2021 and into 2022.
What is a bridge loan?
Bridge loans are short-term sources of financing that support organizations until a specific revenue stream arrives. This need often arises when other funding sources are delayed. For example, a nonprofit may be awarded a large grant, but the grantor is unable to disburse funds until after they are required. In this case, the organization could seek a short-term loan to bridge the gap until their grant is paid.
Unlike credit cards or revolving lines of credit, a bridge loan can be used only once and must be repaid when the permanent financing comes in. Bridge loans from traditional lenders like banks often have high interest rates, sometimes exceeding 8%, to account for their short-term and risky nature.
Why has COVID created more demand?
Technically, it’s not COVID creating the demand. It is the influx of federal COVID relief dollars that have been allocated to health and human services providers addressing COVID-related needs.
Some nonprofits and small businesses were contracted for dollar amounts that far exceeded their annual budgets in normal years. They were asked to rapidly scale their operations to support their communities. These expansions bring their own challenges – capacity building, hiring, and staffing, to name a few – but the reimbursement model of funding created a financial roadblock. Under federal funding requirements, providers had to deploy their own money prior to being reimbursed by local government for their work.
Many nonprofits, particularly smaller or newer entities, did not have available reserves or access to lines of credit and other capital sources to deliver their work before being paid. OnePierce was able to step in and offer them zero-interest bridge loans. OnePierce loans are not usually zero-interest, but we felt it was imperative to support providers to access federal funding for our community. It also became an issue of equity and accessibility in finance.
Why does OnePierce offer bridge loans?
OnePierce’s mission is to build and drive community coalitions that transform health systems and advance whole-person health for all. One way we achieve this is by offering appropriate financing – grants and loans – to our local health and human service providers. Bridge loans support the mission-aligned organizations doing great work.
Additionally, our bridge loan program supports systems change by inviting conversation about the root cause of this financial need. Public dollars, including federal, state, and local funding, is often paid on this reimbursement basis. This policy favors larger, more established, and historically well-funded organizations that can afford to use their reserves or other financing relationships to apply for and receive public funding. It disadvantages smaller, newer, and often BIPOC-led organizations that do not yet have strong reserves. Bridge loans are a temporary fix for this larger systemic issue of supporting providers delivering high quality services to access additional funding.
Can I apply for a bridge loan?
OnePierce plans to support many more organizations through bridge loans. If your organization delivers whole-person health in Pierce County, you are eligible for OnePierce support.
To discuss what type of financing is right for you, please don’t hesitate to get in touch using the Expression of Interest form on our site. We are happy to speak with you regarding your financing needs and to together determine whether there is funding OnePierce can give or lend to improve the lives of everyone in our communities.