Press Release: Capital Good Fund Launches Groundbreaking $4.25 Million Debt Offering

Capital Good Fund Launches Groundbreaking $4.25 Million Debt Offering
Pioneering social enterprise aims to create 60 jobs and change 17,000 lives over five years 

Providence, RI—Capital Good Fund, a Providence-based nonprofit social change organization that provides equitable financial services—small personal loans and Financial Coaching—to create pathways out of poverty, has launched a first-of-its-kind $4.25 million Direct Public Offering.

Instead of making a donation, social investors can earn up to 5 percent and invest as little as $1,000. Investors can be accredited or non-accredited individuals and institutions in 15 states including Rhode Island, Massachusetts, and New York.

“By offering social investors financial as well as social returns, Capital Good Fund is creating a new model for change,” said Founder and CEO Andy Posner. “Large-scale problems require large-scale solutions, but nonprofits often lack the resources to meet these challenges. Where philanthropic funding often amounts to a zero-sum game between nonprofits, the capital markets give us access to a global source of funds with which to grow.”

Capital Good Fund provides financial services to those that would normally only have access to capital through fringe and predatory lenders such as payday lenders, pawn shops, auto title lenders, and other subprime lenders who charge poor families upwards of 200% APR.

With $4.25 million in funds, Capital Good Fund will take a big step towards fulfilling its social mission. The organization plans to create 60 jobs and make17,000 loans in the next five years; this, in turn, will enable them to generate 100 percent of its budget from interest income.

“Capital Good Fund’s debt offering represents an exciting new model for how nonprofits can scale through earned-income strategies,” General Treasurer Seth Magaziner said. “For the past six years, Capital Good Fund has used financial services to serve Rhode Islanders. Now, they are blazing a trail for social enterprises throughout the nation to strengthen their finances and better serve their communities.”

In the first few weeks of the Offering a total of $120,000 has been committed, including $100,000 from Alan Hassenfeld, former CEO of Hasbro Toys.

"I am excited that Capital Good Fund is using this powerful new tool for reaching the less fortunate," said Alan Hassenfeld, President of the Hassenfeld Family Foundation. "I'm proud to invest $100,000 in this debt offering so that thousands of families will have the tools they need to take care of their families."

For more information:

Investors can learn more by visiting the website of Social Capital Fund, Capital Good Fund’s sister nonprofit and debt issuer, at www.socialcapitalfund.org or by contacting Andy Posner, Founder & CEO, via the info here.

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Founded in 2009, Capital Good Fund is a nonprofit, certified Community Development Financial Institution (CDFI) and proud member of the Opportunity Finance Network. The organization provides Financial & Health Coaching and personal loans ranging from $300 to $13,500 across four product lines. Since its founding, Capital Good Fund has disbursed 950 loans totaling $900,000 (with a 92% repayment rate) and graduated 1,000 people through its Coaching programs.

New Car Loan Program & Press Release

This month, we're so happy to announce our car loan product, which will help thousands of Rhode Islands avoid predatory car loans from buy-here-pay-here dealers.

If you have money, you can pay for a car in full. If you have good credit, you can get some great loans from credit union. But if you lack both, you're left with options like those "NO CREDIT!" buy-here-pay-here dealerships, which are notorious for taking advantage of people.

That's where our car loans come in. Our car loans are a more affordable alternative to buy-here-pay-here loans, and can save people up to $9,000 over the lifetime of the loan.

What We Learned From Listening To Our Clients

Image credit: Ky Olsen

I can think of dozens of times when we've struggled to design a marketing campaign, launch a new loan product, or build a community partnership. In each instance, we've attempted to put ourselves in the shoes of those we serve and adjust accordingly. Not surprisingly, we have had mixed results with this approach, for no matter how hard we try, we are far more likely to be biased toward our perspective than we are toward that of our clients.

As we look to scale, however, we realize that one of the biggest challenges will be customer acquisition; our competitors have branches in every low-income neighborhood in the state and boast significant marketing budgets. To put predatory companies out of business, then, we must have an effective and cost-effective marketing strategy. To that end, we recently partnered with Professor Joe Stasio, a marketing professor at Merrimack College, to develop just such a strategy. And the first thing he recommended we do? Listen to our clients.

Why Swiss Restaurants Don't Expect You To Tip

Image source: Dave Dugdale

Over the past few months I have lent my voice to a coalition of groups seeking to raise the Rhode Island minimum wage for tipped workers from $2.89 an hour to the minimum wage for all workers ($9 an hour as of January 1, 2015). Yes, you read that right: the minimum wage for a tipped worker in Rhode Island (think waiters and bartenders) is $2.89! The idea, of course, is that workers will make up the rest through tips, but imagine working in an environment where your income is almost entirely dependent on whether or not your clients choose to live you a tip. Even worse, on slow days with few customers--something over which you have no control--you might earn less than $10 for a day's work.

Now I should point out that, in theory, employers are supposed to make up the difference between the tipped minimum wage and the "regular" minimum wage if tips don't cover it. In practice, however, this rarely happens; among other issues, the difference is exceedingly difficult to calculate. Scores of interviews with waiters and other research have revealed that this law is almost always ignored.

An Easy Way to Save Money

Image credit: 401(k) 2012

Like many people, I use a variety of tools to manage my financial life: I have two checking accounts (one with Bank of America and another with Capital One 360); a savings account; two credit cards; and various municipal bonds, among other accounts. This arrangement makes sense to me for a number of reasons, but the complexity can also create challenges. For example, several months ago I decided to carefully read through my credit card statement, and noticed that for half a year the New York Times had been charging me for a subscription I'd canceled long ago.

After discovering that error—which had cost me nearly $100—I put a recurring event on my calendar to check all my bank, credit card, and other statements. Since then I have found numerous erroneous charges. What's interesting is that none of them were fraudulent; rather, they were simply cases of vendors making mistakes.

I imagine most of us know that we should read our statements every month, but given our busy lives in can be easy to forget to do so. Yet staying on top of our accounts can yield significant savings; in a sense, it's "free money."

So next time you get that credit card or bank statement, do a careful read-through. If anything looks off, call the vendor or your bank. More often that not, it's an honest mistake that can easily be fixed, but only if you notice it and do something about it! This is an important lesson for all of us, and we will certainly use it at Capital Good Fund to help our clients!

Andy is the Founder & CEO of Capital Good Fund, a social change organization dedicated to ending poverty in America. Capital Good Fund provides financial services— small personal loans as well as Financial & Health Coaching—to low-income families.

Why We Need a Rating and Review System for Nonprofit Services

Information Asymmetry
When you want to try a new restaurant, you can use a service like Google, Yelp, or Urban Spoon to read reviews, check hours and menus, and decide on a place to eat. Thanks to online rating services you’ll be able to make an informed decision about where to enjoy a nice meal.

Now imagine you are struggling to manage your debt and want to sign up for financial counseling. You Google 'financial counseling Rhode Island' and a number of options pop up: Money Management International, Rhode Island Housing, Consumer Credit Counseling Services, etc. A little more digging might direct you to Capital Good Fund, Amos House, or one of the handful of other nonprofit financial coaching organizations in the state. What you won't find, however, is what our dinner goers were seeking: ratings, reviews, and comparisons.

Poverty Is Bad For Business

Poverty and Economic Development

Image credit: Jason via Flickr

Poverty is not merely a moral issue; it is an economic problem. We cannot have a strong economy so long as over 45 million Americans live in poverty and 49 million do not get three square meals a day, every day. And we cannot have a strong economy so long as families making $20,000 per year spend $1,200 on check cashing and money orders.

When a payday lender charges 261%, every dollar the borrower spends on interest* is a dollar not spent on savings, education, clothing, and other basic needs (on a $325 payday loan, the average borrower will pay nearly $500 in interest). When a predatory auto loan results in repossession, it becomes that much harder for a family to get to work, school, or the doctor’s office; jobs are lost, children's health and futures are compromised. And when wages are stagnant, a family's ability to buy homes, cars, and furniture—to engage in spending that drives the economy—is severely curtailed.

Nonprofits: Do We Need Them?

A Cause for Celebration?

Image Credit: Cbaquiran

As Capital Good Fund nears its sixth birthday, I would like to pause for a moment and ask two uncomfortable questions: is this cause for celebration, and fundamentally, do we need nonprofits?

Some background is in order. As a nonprofit executive and donor to a multitude of other charities, I am deeply acquainted with what I like to think of as the glossy facade we erect on our annual reports, grant applications, and public communications. We change the life of every person we serve, and we do so with a minimum of cost. Ours is the business model best suited to solving the problem highlighted in our respective mission statements. Everyone involved with our organization (board members, staff, volunteers, donors, and clients) wanders the world with a perpetual smile, the result of the unequivocal good we do in the world.

The Ideal and the Real
Yikes, that sounds cynical, does it not? Relax, I may have just turned thirty, yet I remain ferociously devoted to my idealism, something so many others told my fifteen-year-old self would never happen! But the dictionary makes a clear distinction between the optimistic and the Pollyannaish, and we would be remiss to forget that.  So let's take an unvarnished look at the nonprofit sector and see what we find.

Five Tips For Job Interviews

Over the past six year's I've had occasion to interview dozens of candidates for all manner of positions: volunteers, interns, part-time and full-time employees, and independent contractors.  Given this depth of experience, I think I'm relatively qualified to give five tips for your next job interview:

When Justice Costs Less Than Injustice

Pragmatic Idealism

Image Credit: Pixshark

I suppose that in an ideal world we wouldn't care about the financial implications of injustice; doing the right thing ought to be sufficient motivation.  Of course, that's not always the case, and rather than restricting ourselves to the high road, I think it's preferable to adopt an approach I like to call Pragmatic Idealism (PI).  The PI mentality says that, on the whole, people want to do good, but in reality a lot of factors can get in the way: inertia, politics, financial concerns, entrenched interests, and the like.  The best way forward, therefore, is to chip away at those barriers while continuing to appeal to the public's sense of right and wrong.

Take homelessness, for example.  One would be hard-pressed to find people in support of the disadvantaged living on the street, but at the same time it can be equally hard to garner support for programs that have a cost.  Put another way, how many of us would vote for tax increases so as to fund proven, effective models for putting the homeless into permanent, safe, and affordable housing?

The Chance to Speak

The Power of the Spoken Word
I don't think it's a stretch to say that were it not for his oratorical skills, Barack Obama would not be president of the United States; before his speech at the 2004 Democratic National Convention he was a complete unknown on the national stage.  In the same vein, it's hard to imagine the civil rights movement without the soaring rhetoric of Dr. King.

Photo credit: Minnesota Historical Society

In both cases, success was made possible by an army of lawyers, accountants, organizers, strategists, marketers, policymakers, and protesters.  Civil rights had the Southern Christian Leadership Council, the NAACP, the Nonviolent Student Coordinating Committee, the ACLU, and others;  Obama had the Democratic party machine, his own campaign team, and countless other entities supporting him. Yet the spoken and written word were what gave these movements their raison d'etre.

On Taxes on the Poor & the Rich

Source: 401(K) 2012

The State of State Taxes
President Obama's recent State of the Union speech consisted of a number of proposals and policy ideas, one of which touched on a point of great contention in this country: tax policy.  The left says that the rich don't pay their fair share, and the right argues that the poor get a free ride.  Sure, there's more nuance to the political differences--but not much!  This conflict makes Obama's proposal to "...extend tax credits to the middle class by hiking taxes on wealthier Americans and big banks..." (The Huffington Post) that much more interesting.

Lost in the vitriol about tax breaks and rates are the facts.  That's a shame, because facts happen to be useful when making policy decisions, especially those related to the nation's finances.  Fortunately, a fascinating report by the Institute on Taxation and Economy Policy provides just that information.  Titled Who Pays: A Distributional Analysis of the Tax Systems in All Fifty States, the report "...assesses the fairness of state and local tax systems by measuring the state and local taxes that will be paid in 2015 by different income groups as a share of their incomes."

Behavior Change Through Contracts--With Yourself

Contracts, Contracts, Contracts...

Image Credit: Gold Lawn Firm

We often signal our intentions by signing a contract, be it at a gym, financial institution, or food coop. Contracts serve a legal function, but they can have the added benefit of financially and morally binding us to stick to a behavior--healthy eating, working out, building credit.  And it turns out that a lot of research in behavioral economics is showing that these instruments are indeed highly useful motivational tools; only the most effective contracts turn out to be those we sign with ourselves.

These tools are called commitment devices, defined as "strategies whereby people agree to have a penalty imposed on them (that is, they agree to incur a loss) if they do not reach a particular goal" (World Development Report 2015).  A whole host of free and low-cost websites and apps have cropped up to offer people commitment devices; these include Beeminder, stickK, 21 Habit, and Go Fucking Do It (yes, that's actually what it's called!).  They all have their quirks, but the basic idea is the same: you commit to a goal, such as to run 3 times per week, and if you don't meet it you allow the company to charge your credit card.  SticK's model is really interesting: if you miss your goal, not only are you charged, but the funds get donated to a cause in which you don't believe (e.g., if you are pro choice, the funds will go to a pro life organization).

On Balancing Risk & Rewards In Lending to the Poor

Photo Credit: David Yu

Mission Versus Business
Here's a fundamental challenge in our business: the greater the alignment between our lending and our mission, the greater the strain on our loan portfolio performance.  Phrased another way, the highest impact loans--those to ex-offenders, domestic violence survivors, and the temporarily homeless-- are also the riskiest.  This is through no fault of their own; rather, it's simply a result of the tremendous strain that personal and financial instability places on a person.

As a nonprofit, it is incumbent on us that we adhere to our mission, which is to use financial services to create pathways out of poverty.  Yet as a business, especially as one that debt finances its lending operations, we must also ensure that we are fiscally sound.  To address this tension, we've taken several approaches.  First and foremost, the interest rates we charge are designed to compensate for higher losses.  In fact, whenever someone questions why we charge 30% on Emergency Loans, our answer is simple: losses are around 15% and servicing costs are very high.  That said, we don't really care who pays the interest; funders are welcome to subsidize the loans so that the borrower pays a lower rate!

On the Arts & Wealth

The Power of Live Theatre (yes, I prefer the British spelling!)

The Walt Disney Concert Hall in LA cost $240 million (Photo Credit)

Growing up I was privileged in many ways, one of them being the number of plays, musicals, and concerts I had the opportunity to see.  I distinctly remember dressing up for the show, the architecture of the theatres, the voices and movements of the actors.  Several theatrical experiences stand out as seminal moments in my development as a person in general and a writer and poet in particular.  For instance, a number of years ago my parents and I went to see The Glass Menagerie at a small playhouse in Burbank, CA.  The play, which is a masterpiece, came to life thanks to absolutely brilliant acting; when the curtain finally came down I was transfixed.

Live theatre, when done well, can be a transformational experience.  It opens the mind, stirs the soul, and awakens the senses.  In short, it can play a critical role in a person's life--making them more cultured, thoughtful and self-aware.  Unfortunately, as I've grown older and become more involved in fighting poverty and injustice, I've found myself increasingly concerned that all too often the arts are by the rich, about the rich, and for the rich.

On Dogs, Humans & Personal Responsibility

Dogs--We Sure Love 'Em

A loving and loyal friend. Image credit: Wikimedia.org

Take a dog lover to an animal shelter and you will almost certainly hear some variation of, "What did the dog to do deserve being here?"  And unless it is particularly vicious, the answer is: nothing.  We don't blame dogs for being strays, and we are sad to know that so many of them live out their days in small cages in noisy, dirty pounds, often destined to be euthanized.

Our love of dogs is understandable.  By and large, they are loving companions.  They bring us joy and friendship.  They guard us and guide us and support us.  And in exchange, we Americans spend just under $56 billion on them!