New IFF Loan Program Reduces Barriers to Capital for BIPOC-Led Nonprofits on Chicago’s South and West Sides September 23, 2022

In a Nutshell

What: An overview of a new loan product created by IFF to be more responsive to the capital needs of BIPOC-led nonprofits on the south and west sides of Chicago that’s being supported by targeted, equity-, and client-centered messaging and community outreach to meet nonprofit leaders where they are. Since launching this summer, two flex loans for BIPOC-led nonprofits have been closed, helping Male Mogul Initiative and Urban Male Network bridge grant funding to accelerate their growth.
Chicago, IL
Loan Totals:
$35,000 flex loan closed in August 2022 for Urban Male Network; $50,000 flex loan closed for Male Mogul Initiative in September 2022
IFF Staff Lead:
Brett Mueller, Senior Lender – Northern Illinois and Northwest Indiana

For almost 50 years, community development financial institutions (CDFIs) have worked to align capital with justice, bridging gaps in the financial system where mainstream lenders can’t or won’t reach by increasing access to capital, technical assistance, and other specialized supports in under-resourced communities.

As IFF CEO Joe Neri wrote in a 2019 blog post, however, inheriting the “very tools of capitalism that have wreaked havoc on communities of color for decades in repeated cycles of cynical wealth extraction” requires CDFIs to continually interrogate the products, services, and practices in use through a racial equity lens to ensure that they are not perpetuating the very inequities they’re designed to address.

At IFF, that’s meant – among other examples – advocating for colleagues in the CDFI industry to do away with appraisals that hinder investments in communities where redlining artificially deflated property values; revising our own target market criteria to make it easier for smaller, newer nonprofits that are led by people of color to apply for and get the capital they need to create spaces necessary to grow; and, most recently, introducing a new “Flex Loan Program” designed specifically to be more responsive to the needs of BIPOC-led nonprofits on the south and west sides of Chicago.

A new approach to align capital with justice

Though IFF has served nonprofits for more than 30 years, there are still communities and nonprofits beyond our existing networks and mailing lists. We need to think about not only the accessibility of capital, but also the accessibility of message and messenger. We need to be proximate to and in deep relationship with the communities we seek to serve.

With the support of The Harry and Jeanette Weinberg Foundation, IFF built a marketing infrastructure rooted in targeted, equity-, and client-centered messaging and outreach activities on Chicago’s south and west sides. We created the lists we needed, focusing on five priority communities: North/South Lawndale, Englewood, Chatham, Little Village, and Bronzeville. And through direct mail outreach, social media campaigns, word-of-mouth, and a series of community “Propel” events at local businesses and nonprofit facilities in these communities, IFF is now meeting nonprofit leaders where they are.

The Propel events have brought together IFF lenders and real estate consultants with nonprofit leaders for coffee and conversation designed to develop relationships and uncover how IFF’s products and services can better support BIPOC-led nonprofits. While the Propel events are ongoing, and learnings at future gatherings will inform our approach to capital access and the provision of services on Chicago’s south and west sides, IFF has already activated a responsive capital product that can stand in the gap and help to position these nonprofits for possession of their dreams.

Flex Loan Program at a Glance

Eligibility Requirements: Nonprofit must be headquartered on the south or west sides of Chicago and serving communities there
Loan Limit: $50,000
Term: Three years
Amortization: Three years
Application Requirements: P&L and balance sheet for the most recent full fiscal year; latest interim month-end (P&L and balance sheet); Board of Directors-approved budget; 501(c)3 letter; Articles of Incorporation; recent newsletters, articles, press releases, or other materials that highlight the organization’s work

The Flex Loan Program – enabled by support from the Weinberg Foundation – acknowledges the fact that nonprofits IFF wants to reach on the south and west sides have capital needs that our facilities-focused lending isn’t designed to address. To bridge this gap, the program offers loans of up to $50,000 that can be used in a variety of ways, including as working capital for new organizations, to bridge grant funding, to facilitate minor repairs to leased facilities, purchase vehicles or equipment needed for programming, and to refinance high-interest debt. To ensure that the Flex Loan Program is culturally responsive to diverse groups of nonprofit leaders, collateral materials have been developed in English and Spanish.

Meant to maximize financial flexibility without burdening BIPOC-led nonprofits with administrative requirements, the program minimizes the supporting documentation required to apply for loans and offers an expedited closing process to put capital in the hands of community changemakers as quickly as possible. Doing so is critical to more effectively supporting BIPOC-led nonprofits, which often have fewer resources on hand than white-led organizations – limiting their ability to respond to challenges and opportunities for growth as they arise. This is especially true among Black-led nonprofits focused on improving life outcomes for Black men, which a 2020 Bridgespan report found have organizational revenues approximately 45 percent lower than that of white-led organizations doing the same type of work.

Flex loans in practice

Male Mogul Initiative

After hearing about IFF’s Flex Loan Program from another nonprofit headquartered on Chicago’s South Side, Walter Mendenhall IV recognized an opportunity to leverage low-cost capital to help his organization grow. The founder and chief executive director of Male Mogul Initiative (MMI) – which provides leadership and entrepreneurial training to young people of color and citizens returning from incarceration – Mendenhall had successfully grown the organization’s annual budget to $450,000 since its founding in 2016 by embracing diverse revenue streams fueled in part by a social enterprise.

Currently leasing a space in the Bronzeville neighborhood’s Boxville Marketplace to house the organization’s retail clothing store and operating its programs in schools and shared community spaces, Mendenhall had a three-year plan in place to purchase MMI’s first permanent facility. First, however, the organization needed to build capacity. And with a professional background that includes helping NBA player Kyrie Irving develop an impact investment fund, Mendenhall was well versed in how debt could help MMI do exactly that.

“What I learned through that experience was how startup businesses leverage and layer their capital stacks with equity and debt investments,” says Mendenhall. “It also taught me not to be afraid of debt, but to have a plan for debt. I realized that we could use the same model at MMI to build capacity with private fundraising, grant funding, and loans.”

With a $75,000 grant from the State of Illinois secured that’s enabling MMI to lease a new program space downtown to provide young Black men who are not in school or employed with workforce development training, soft skills, and social-emotional support, MMI is using a $50,000 flex loan from IFF to bridge grant funding as the organization continues to scale up.

Leveraging different types of capital is one of the only ways, if not the only way, that we’re going to be able to grow in a way similar to a white-led nonprofit organization.

“Leveraging different types of capital is one of the only ways, if not the only way, that we’re going to be able to grow in a way similar to a white-led nonprofit organization,” says Mendenhall. “We can’t depend on traditional grants and donors alone, and that means we need to be more creative and more willing to smartly manage loans and other types of capital.”

Currently serving 120 young people each year, MMI is progressing toward its goal of owning its own space and increasing the number of young people it can support as a result. That means greater impact on Chicago’s south and west sides, and more success stories like the one that stands out most to Mendenhall from MMI’s six years of work.

“There’s a young man we work with whose friend was killed a block away from our work site,” shares Mendenhall. “Out of fear, he began carrying a gun, and the police soon caught him with it. He had never been in trouble before, and we were able to provide him with some support from a legal perspective and to vouch for his character. He ended up receiving probation instead of a jail sentence, and he’s paid us back by continuing to work for our organization. He’s fully employed now and recently moved into his first apartment by himself at the age of 20. He credits MMI with giving him the chance and the opportunity to correct a mistake, and now he’s in the position to help strengthen his community.”

Urban Male Network Dr. Marlon HaywoodA native of Chicago’s Englewood neighborhood who went on to become the first member of his family to graduate from college, Dr. Marlon Haywood knows firsthand the barriers to success young Black men who are growing up on the city’s South Side face. So, too, does he understand intimately the power of positive role models willing to invest their time in helping young people harness their talents and channel them into productive pursuits.

“My mom and dad were only 18 when they had me, which, statistically, would have indicated that my life would turn out a certain way,” says Haywood. “But I had mentors in my family and outside of the family who were instrumental in helping guide me and making sure that I was focusing my energy in the right place. There’s a misconception that young men of color don’t care about the community, but that’s not the case. They want to see a better Chicago like everyone else, but many don’t know where to start in making that a reality.”

With the help of Urban Male Network (UMN), the organization Haywood founded in 2013 while working at a local community college, approximately 130 young people each year are provided with the support they need to strengthen their communities by focusing on personal, academic, and professional growth. Offering three distinct mentoring programs, UMN has an office at Crane High School on Chicago’s West Side, operates in six other schools in the city, and has steadily grown its annual operating budget to almost $100,000 while expanding its programs to new locations.

There’s a misconception that young men of color don’t care about the community, but that’s not the case. They want to see a better Chicago like everyone else, but many don’t know where to start in making that a reality.

“All of this started with me spending my own money to bring a small group of young men together to talk about their lives and topics relevant to their growth, and it was really a passion project,” explains Haywood. “I was fortunate to have a few friends with me at the beginning, and we started to see the impact of what we were doing but were also in our early 20s and didn’t really know what we were starting. There’s been so much we’ve learned in the past nine years, and also lots of work to take an idea, turn it into something structured, and figure out how to manage the business side of the work.”

Having overcome these growing pains while transitioning from a grassroots community organization to an established nonprofit and putting in place processes to enable its programs to be efficiently replicated from one school to the next, UMN is poised for the next evolution in its growth cycle by pursuing larger and more complex grant funding – and a $35,000 flex loan from IFF will help accelerate the process.

“We have the experience of running the organization now and a strong track record of successfully working with young people, and so the focus is on going after larger funding opportunities that will make us more sustainable,” says Haywood. “But to do that, we have to be able to demonstrate that we can manage the budgets and pay our staff and contractors while waiting to be reimbursed. The loan from IFF is going to make that possible. I remember wondering early on what difference I was really going to make mentoring five young men when there was a whole city out there, but this feels like the moment we have been preparing ourselves for to scale up.”

Learn more about IFF’s work on the south and west sides of Chicago and the Flex Loan Program