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

By OnePierce

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

OnePierce Community Resiliency Fund (OnePierce) splits its assets 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

Community Lending Strategy

Loans have several distinct advantages over grants:

Scale and size of funding

OnePierce is intended to be a community asset for leveraging different sources of funding. Those sources include money from Elevate Health and Pierce County, as well as private sources of investment. By accessing program related investments, OnePierce can bring more money into the County. For example, OnePierce can secure program related investments in the range of $2-10M, whereas grants are often limited to several hundred thousand dollars per year. This lower amount of funding is not useful unless there is a direct matching need within Pierce County. OnePierce’s early assessment of community needs revealed the affordable housing shortage and the landscape of developers. As a result, OnePierce is confident growing in a slow and steady manner when it comes to taking on and redistributing loans.

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. 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

Finally, 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.

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.

Let's connect about your funding needs

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