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Community Lending Series Part III: Four Reasons Why Loans Benefit the Community

By Lauren Fulton

In the final part of our community lending series, we’ll share the distinct advantages loans have over grants when it comes to investment. If you missed Community Lending Series Part I: Why OnePierce Chose to Include Community Loans in its Investment Strategy or Part II: The Challenges of Lending Programs, they are available to read at any time.

OnePierce Community Resiliency Fund (OnePierce) splits its funding across three programs: 1) grants; 2) community loans; 3) health innovation funds. This decision was driven by its desire to address the needs of community groups and a goal to bring scale and longevity to OnePierce programs.

OnePierce Investment Strategy

Loans have several distinct advantages over grants:

Scale and size of funding

OnePierce is a community asset that leverages different types of funding. Our funding comes from Elevate Health, Pierce County, philanthropy, and private investors. By accessing private investment through program related investments (PRI) or mission related investments (MRI), OnePierce can bring additional money into Pierce County. Private investment is usually in the range of $2-10M, whereas grants are often limited to several hundred thousand dollars per year. PRI and MRI are deployed through the OnePierce Community Lending program and can be a steady source of growth.

Sustainability of funding

OnePierce plans to remain a community asset for the long-term. When OnePierce distributes grants, that money is no longer able to be deployed in the future. However, when OnePierce distributes loans, that money is returned so it can be loaned out again and again, supporting multiple projects in the community over time.

Longer term projects and work

It is common for grants to be distributed as one-off contributions to fill gaps in organizational budgets or projects. Larger grants may be renewed each year. However, the expectation is that grants address a particular project or need that will produce results within a short timeframe. Loans, by contrast, can have terms that exceed 5-6 years. They may contribute towards the construction of real estate that will not be completed for 10 years. This type of patient capital is critical for building and improving community infrastructure.

Deeper alignment with social impact

Loan terms can be aligned with social impact. For example, a development loan for a workforce training center may have an interest rate of 4%. If the training center is able to show outcomes that include high percentages of clients attaining and maintaining employment, that interest rate could be reduced to 2%. This is an example of an impact-linked loan term, in which the social good helps drive financial rewards.

In conclusion, loans are able to leverage steady and scalable sources of capital and bring additional funding to our local communities.

Are Loans Right for Your Organization?

OnePierce offers grants and community loans in order to best serve the service providers and community-based organizations within Pierce County. We understand that some providers will require grants, whereas others will have the business models and experience to take on loans.

If your organization is decide the right financing fit, please contact us. We are happy to speak with you about your organization’s financing needs and to together determine whether OnePierce can support your work to improve the lives of everyone in our communities.

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