ConceptLink Interviews RSF on Social Finance & Relationships
19 June 2009
ConceptLink Consulting attended the 7th Annual Business Alliance for Local Living Economies (BALLE) Conference in Denver, Colorado – a unique event which gathered more than 400 business owners, policymakers, and social entrepreneurs to discuss local and international economic sustainability in May 2009.
At BALLE we had the pleasure of meeting Mark Herrera, Manager of Client Development at RSF Social Finance. For 25 years, RSF has been developing ways of working with money that link the values of donors and investors with the missions of social enterprises. RSF provides grants and loans to non-profit and for-profit enterprises. The organization takes a unique relationship-driven approach to connecting borrowers and investors and borrowers. In this interview, Mark tells us more about RSF’s work.
Q: Mark, how long have you been with RSF and what is your role as Manager of Client Development?
A: In July 2009 I’ll complete 11 years with RSF. I focus on fund development and investor and donor client relationships.
Q: How does RSF’s business model work?
A: RSF is a mediator of gift and loan money between investors and donors and social enterprises and grant recipients. We work primarily with values-driven social enterprises in the areas of Food & Agriculture, Education & the Arts, and Ecological Stewardship.
We operate three types of loan funds: Social Investment Fund, Mezzanine Fund, and PRI Funds. These funds finance loans to both nonprofit and for-profit social enterprises that meet a combination of financial, operational, and impact criteria. The Social Investment Fund is our core lending program, and provides a fixed income rate return for investors. The RSF Mezzanine Fund is brand new, and provides growth capital for enterprises and a market return for investors. The RSF PRI Funds are in the process of being launched. They will provide a below market rate of return to investors, which will be largely foundations, and thus facilitate below market loans as well to projects in particular focus areas and geographic regions.
To facilitate strategic giving to nonprofit organizations, we operate Donor Advised Funds, which enable each donor to establish his or her own “personal foundation.” We charge a small management fee for our donor advised funds of 1% to 2.25%, depending on the amount of the gift and the complexity of the investment portfolio. Gift money is invested in line with donor’s values and granted out to various nonprofits. While we do some grant making out of our own funds—the Seed Fund for example--the vast majority of grants are made through the donor advised funds.
Q: What stage social enterprises do you work with? How do they apply for funding?
A: Our core lending is made to second-stage social enterprises and established nonprofit organizations. Mission alignment is our first priority when evaluating a borrower, but the enterprise must also have a track record with solid financials. The minimum loan amount is $200,000.
We also provide seed funding for newer initiatives. The gift sizes are $1,000 and up; only about 12 are made year. Most organizations hear about us through word of mouth. Applications are found online for grants and loans.
Q: How has the current economic downturn impacted your clients? Is RSF helping them weather the storm?
A: We’re seeing more projects struggling than before in the last 6-9 months. One loan had to be written down but overall our default rate is very low – less than 1%. We measure default based on the dollar amount of our loans, not on the number of loans made. Overall our loans are performing well, considering the challenging economic climate.
Recently we have been putting clients into forbearance and working with them to avoid default. Because we emphasize relationships, we have also been visiting our clients and spending a lot of time with them during these challenging times.
Q: Sounds like you have a great relationship with your clients. Tell me more.
A: We want our clients to know each other and we create relationships that are direct, personal, and long-term. We talk to our clients about how we set our pricing and how it affects both borrowers and investors.
Our clients not only receive financing to meet their capital needs but through a close relationship with us, each becomes part of a larger community working to change the way the world works with money.
At BALLE we had the pleasure of meeting Mark Herrera, Manager of Client Development at RSF Social Finance. For 25 years, RSF has been developing ways of working with money that link the values of donors and investors with the missions of social enterprises. RSF provides grants and loans to non-profit and for-profit enterprises. The organization takes a unique relationship-driven approach to connecting borrowers and investors and borrowers. In this interview, Mark tells us more about RSF’s work.
Q: Mark, how long have you been with RSF and what is your role as Manager of Client Development?
A: In July 2009 I’ll complete 11 years with RSF. I focus on fund development and investor and donor client relationships.
Q: How does RSF’s business model work?
A: RSF is a mediator of gift and loan money between investors and donors and social enterprises and grant recipients. We work primarily with values-driven social enterprises in the areas of Food & Agriculture, Education & the Arts, and Ecological Stewardship.
We operate three types of loan funds: Social Investment Fund, Mezzanine Fund, and PRI Funds. These funds finance loans to both nonprofit and for-profit social enterprises that meet a combination of financial, operational, and impact criteria. The Social Investment Fund is our core lending program, and provides a fixed income rate return for investors. The RSF Mezzanine Fund is brand new, and provides growth capital for enterprises and a market return for investors. The RSF PRI Funds are in the process of being launched. They will provide a below market rate of return to investors, which will be largely foundations, and thus facilitate below market loans as well to projects in particular focus areas and geographic regions.
To facilitate strategic giving to nonprofit organizations, we operate Donor Advised Funds, which enable each donor to establish his or her own “personal foundation.” We charge a small management fee for our donor advised funds of 1% to 2.25%, depending on the amount of the gift and the complexity of the investment portfolio. Gift money is invested in line with donor’s values and granted out to various nonprofits. While we do some grant making out of our own funds—the Seed Fund for example--the vast majority of grants are made through the donor advised funds.
Q: What stage social enterprises do you work with? How do they apply for funding?
A: Our core lending is made to second-stage social enterprises and established nonprofit organizations. Mission alignment is our first priority when evaluating a borrower, but the enterprise must also have a track record with solid financials. The minimum loan amount is $200,000.
We also provide seed funding for newer initiatives. The gift sizes are $1,000 and up; only about 12 are made year. Most organizations hear about us through word of mouth. Applications are found online for grants and loans.
Q: How has the current economic downturn impacted your clients? Is RSF helping them weather the storm?
A: We’re seeing more projects struggling than before in the last 6-9 months. One loan had to be written down but overall our default rate is very low – less than 1%. We measure default based on the dollar amount of our loans, not on the number of loans made. Overall our loans are performing well, considering the challenging economic climate.
Recently we have been putting clients into forbearance and working with them to avoid default. Because we emphasize relationships, we have also been visiting our clients and spending a lot of time with them during these challenging times.
Q: Sounds like you have a great relationship with your clients. Tell me more.
A: We want our clients to know each other and we create relationships that are direct, personal, and long-term. We talk to our clients about how we set our pricing and how it affects both borrowers and investors.
Our clients not only receive financing to meet their capital needs but through a close relationship with us, each becomes part of a larger community working to change the way the world works with money.
