Part 2: Reaching more leaders of color with the financing tools they want

By Joe Neri (see intro by Ellis Carr and Joe Neri)

 

Like many organizations today, IFF is endeavoring to be more intentional and race-explicit when designing programs and products. That’s why, a couple years ago, we worked with JPMorgan Chase to launch a program called the Stronger Nonprofits Initiative, or SNI, to support Chicago nonprofits led by people of color.

Nonprofits are at the heart of IFF’s mission, and our loans and real estate consulting services help organizations build net assets through ownership of their facilities. A majority of IFF’s loan recipients – providers of early childhood education, workforce development, affordable housing, health care, and other vital human services – operate in low-income communities and/or communities of color, but SNI is specifically designed to ensure IFF’s services are reaching the highest-impact nonprofits in Chicago that are led by and/or deeply serve people of color.

The SNI program is further targeted to those nonprofits at an early stage of acquiring or renovating a facility – often times, a once-in-a-generation move that can make or break a nonprofit’s future. The trainings then take on both a very real near-term purpose – to prepare nonprofits to make sound decisions about tackling real estate challenges and taking on debt to do so – as well as the longer-term goal of building their overall financial resilience.

Now, many “capacity building programs” offered by CDFIs begin and end with workshops or other learning opportunities – mostly focused on how borrowers can better understand us lenders. But SNI goes further, offering:

  • Not just general financial workshops but also customized one-on-one financial coaching to address each organization’s and each leader’s specific needs and goals
  • a “cohort approach” that fosters a sense of community amongst the no more than 10 nonprofits per group that engage in peer learning, networking, and idea-sharing throughout the 14-month program
  • Affordable and flexible financing designed to meet nonprofit needs
  • Deeply discounted real estate consulting services – a big boost for nonprofit leaders who usually do not have experience with facility relocation, renovation, or expansion

Here’s what’s happened so far. Out of the 20 initial participants, 18 have utilized the real estate consulting services to begin thinking through the financial ramifications of leasing, owning, renovating, and/or maintaining the structures where they work. For example, IFF worked with one South Side arts organization to map 39 existing properties, identify potential sources of funding tied to their locations, complete facility assessments of several properties in need of renovations, and explore creating a cultural district overlay for the community.

As those organizations begin making strategic decisions about their facilities, some of them are pursuing financing – IFF has provided loans to three of the participants so far – in a way that makes sense for their long-term financial and programmatic goals.

But the number of real estate engagements and loans only tells part of the story. According to program surveys and interviews, participants walk away with a wide range of ideas, connections, and new opportunities. For some, it’s a chance to expand their network of nonprofit peers and collaborators. Others gain a better understanding of when and how to address simmering issues with their facilities or devise a plan for refreshing their budget processes.

Here’s what one participant said: “Before the financial coaching, we were doing our budgeting process almost backwards – coming up with the budget at the finance director level and then funneling it down to the program level. Now we start at the program level and feed that up into the budget. We’ve gotten the program staff directly involved, so they understand why some expenses are a ‘no’ and are able to influence the budget in ways that are specific to their needs. The team loves it.”

This kind of feedback is not uncommon among our program participants, and it reminds us that capacity building programs like SNI pay dividends for a very long time – even if there isn’t an immediate financing need that we can “count” as progress.

We – along with our program backers at JPMorgan Chase – are so excited by the progress so far that we’ve expanded the program to other Midwest cities. Detroit’s first cohort launched in September 2019, and we will introduce additional opportunities in Milwaukee next year along with other Midwestern cities.

Still: We always think there’s room for improvement. IFF values a culture of learning, and we want to do better even when we’re already doing good. In that spirit, I offer to our readers some of the unanswered questions that IFF’s capable and thoughtful team are currently working through:

 

1. How can we better integrate the financial and real estate portions of the training?

I haven’t yet mentioned an amazing partner in the SNI effort: Fiscal Management Associates (FMA), a nationally-known consulting firm that specializes in helping nonprofits build their fiscal management capacity. IFF and FMA share responsibilities for the SNI program. IFF’s real estate team provides the real estate guidance, IFF’s lending team works with those nonprofits who wish to seek a loan, and IFF is primarily responsible for “administration” – which means we market the program, run the application process, and provide physical spaces for the trainings. But FMA delivers the bulk of the actual financial management training – the full-day workshops as well as the one-on-one coaching.

One thing that both staff and participants have observed is that these different pieces sometimes seem too distinct and separated. As one person described it: “It was kind of like, ‘Ok, FMA, you’re up.’ And then ‘Ok, IFF, you’re up.’ And there was a disconnect between what FMA was doing and what IFF was doing.”

Sometimes, in the course of launching a new program with lots of new responsibilities, we jump right to delegation of tasks to make the whole thing manageable. But clearly if we are to ask nonprofits to see linkages between their finances and their facilities, we need to set a better example. It makes sense that we should be looking for ways that FMA’s financial coaching and IFF’s real estate coaching can be better interconnected.

We’re still wrestling with how to better integrate IFF’s and FMA’s group workshops; that’s really about curriculum development – a muscle that we, like most CDFIs, need to exercise a lot more to be successful. But one way we think we can achieve better integration in the next iteration of the SNI program is by having IFF’s real estate and/or lending staff, as appropriate, present for FMA’s one-on-one coaching with some organizations that are likely to need our support. That way, the advice from FMA and IFF will be more clearly linked not only to each other but also to the specific needs of the nonprofit.

 

2. How can we better design the curriculum to explicitly serve people of color?

SNI was explicitly created for nonprofits led by and/or deeply serving people of color. The content was customized for the nonprofit experience … but not-so-much for the experience of people of color. As one participant put it: “I know the stats that organizations of color have a harder time getting capital, but the financial information was pretty generic. It would have been helpful to know which funders have a better track record of underwriting organizations of color, how to foster that relationship, and what we need to do to have the most success. Given structural racism, what puts organizations over the top?”

As we work to refine and replicate SNI across the region, we are looking to move from our previous race-neutral framework to a more race-conscious one. We’re asking ourselves:

  • Is this program for people of color solely because of who’s in the room (nonprofit leaders of color), or because of what’s taught during their time together (a curriculum that better acknowledges the structural barriers to financial access and facility quality)? We believe it’s both, and we’re working to strengthen the latter.
  • Are there better ways to leverage peer-to-peer learning, and/or bring in peer-to-mentor relationships amongst leaders of color? Absolutely. We got great feedback on the peer learning aspect of the program, and we plan to build it out even more.
  • How can we make space for participants to discuss their shared experiences as leaders of color serving communities of color? Past participants have reminded us that “peer learning” is not limited to technical solutions to financial challenges; there’s also tremendous value in sharing the lived experiences of people of color in leadership positions. Going forward, our program more deliberately makes space for those stories to be shared.

 

3. How should we determine selection criteria?

Not surprisingly, when we first launched SNI, our Chicago-based lending team already had a pretty good idea of which organizations in the city could really benefit from this program. We know a vast network of nonprofit leaders, especially those at human service agencies operating in communities of color on the south and west sides of Chicago. So it was pretty easy to reach out personally and get participation from a great group of leaders.

Certainly it was never our intention that only those organizations with a previous relationship with IFF be allowed to participate – but I’d be lying if I said there wasn’t a strong correlation there. As the program moves into its third year, we are definitely thinking through ways to reach more groups through a clear set of criteria.

For example, we previously stated that participating nonprofits must serve people/communities of color. But we believe that key to serving people of color is being led by people of color, and so we explicitly want at least one member of the leadership team (e.g., Executive Director, Chief Financial Officer, Board Treasurer, etc.) that attends the trainings to be a person of color. Intentionally investing in the leadership development of a person of color not only helps “even the playing field” for individuals who often don’t have the same access to networks, resources, and opportunities as their white counterparts; it elevates them as assets in their organizations and communities and also helps ensure their voices are part of conversations that influence communities and systems – benefitting us all.

Another relevant criterion is where on the continuum of “financial strength” the ideal participant lies. If a nonprofit has a large budget and established financial processes, maybe they don’t need this program – maybe, even, the program is simply another barrier to accessing capital. If a nonprofit has a very small budget and completely lacks financial infrastructure, maybe they aren’t yet ready for the program. Our staff calls this the Goldilocks Dilemma – we’re trying to identify nonprofits that aren’t too big and aren’t too small, but fit “just right.” One way we’ve tried to solve for this is looking not just at individual applicants, but also at the group as a whole. After all, they will attend the workshops as a group and engage in peer learning along the way. We believe there is strength in the diversity of the group and ways organizations at different points in their financial journey can learn from each another.

These are just a few of the challenges/opportunities in continuing to provide and grow a strong program that provides so much more than capital – and so much more than the traditional “capacity building” offered by many CDFIs. SNI is a good example of how CDFIs can go beyond raising and deploying capital to providing multiple supports along a continuum of activities to facilitate better access to capital and begin to address some of the disparities in lending.

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