We’ve had the honor of working with some inspiring local organizations over the course of our Pathways to Patient Capital program. They’re an important part of the identity of the places they work in, and they became that way because they run programs that are backed by their constituents and have a history of impact. That community role has become even more important in light of the COVID-19 pandemic and all the challenges it thrusted upon the manufacturing community. 

In this program, we heard from capital practitioners that are part of the Pathways to Patient Capital program, in an illuminating discussion about the different kinds of flexible capital they’re deploying to help businesses overcome so much uncertainty. 

The discussion came on the tail of our newest report, Forging Fairness, which looks in-depth at each of the Pathways to Patient Capital cohort organizations and the people behind them. It’s a series of short biographies that describes what makes their work so unique, alongside the life events and experiences that led the people behind them to get into community investment.

Here, we’ll share some brief takeaways. We heard from the Mountain BizWorks team in Asheville, North Carolina (community investment manager Moriah Heaney, entrepreneurship program manager Kareen Boncales, and entrepreneur-in-residence Jeremiah Robinson) about how they’re overseeing millions of dollars to help businesses and nonprofits, and how they’re preparing for defaults on some of their loan products. We heard from Nia Evans, director of Boston Ujima, about their decision to launch a rapid response grant fund that will now become part of their permanent services. Katie Johnson, business support and impact specialist for the creative business accelerator at Bridgeway Capital in Pittsburgh, told us about how her job has changed dramatically in recent weeks, and how her organization has launched a new kind of flexible capital that they’re hoping to extend into the future.

Pathways to Patient Capital advisory board members Laura Wolf-Powers from Hunter College, Chris Brown of PRC, and Victor Rubin of PolicyLink deserve an extra thanks for leading the discussion.

Here’s what they had to say:

New forms of  “patient capital” are emerging that cater directly to businesses or even entire sectors bearing the economic brunt of this pandemic. Mountain BizWorks is overseeing a $5 million grant fund that comes from the occupancy taxes collected by their local county’s tourism development board—a redirect that was approved by the North Carolina General Assembly. Mountain BizWorks will be investing that money into tourism, their county’s largest economic sector, alongside a $9 million low-interest loan fund, supported by a local health trust and federal support through the Small Business Administration’s Paycheck Protection Program (PPP), directed at non-profits and small businesses mostly in rural areas. 

Boston Ujima Project has launched a rapid response grant fund that will help local businesses pay their employees and plan for how to navigate the pandemic. Ujima is also working with Berkshire Bank and other financial institutions to oversee the PPP Equity Access Initiative: a new program that allows local businesses to access PPP loans through partnering banks even if those businesses haven’t been their prior customers.

The first thing Bridgeway Capital did when the pandemic started hitting was to ask all of their loan clients if they needed to defer on payments (most of them did), and provided them the option of not paying for three to six months. They’ve also partnered with a funder to create a Covid-19 response fund that offers loans with four percent interest and no payment required for the first three months to minority and women-owned businesses or businesses in low to moderate income areas. 

Some are also working to make these new products permanent fixtures of the work they do. Ujima Boston’s rapid response grant fund will become a continuous service offered by the democratic investment fund. Bridgeway Capital wants to extend their Covid-19 response fund into the near future. “We want to retool that as a fund to meet the needs of businesses that are reopening,” said Bridgeway Capital’s Katie Johnson. 

Organizations are pivoting to respond to their clients’ needs while also trying not to overwhelm them with information. Everything is unprecedented about these times. New small business support initiatives are hatching across the country, governments are creating new programs to help local economies, and organizations like those that participated in the webinar are trying to proactively respond to circumstances that none of us have ever experienced in our lifetimes. 

But they’re also trying to make sure they’re not providing too much information, or information that might be irrelevant, to businesses with specific needs. 

“Pretty early on one of the things we decided from an information point of view was to act as a curator and to not overwhelm our members, businesses, investors, et cetera with information,” said Nia Evans at Boston Ujima Project. That approach, said Evans, led them to organize information that could benefit their primary stakeholders—businesses, grassroots organizations, artists in the community, and more—and in turn create the kinds of products that would be most impactful. 

Mountain BizWorks has also been carefully selecting the information they’re getting out to clients. Their educational team has pivoted to provide case-by-case advice to the businesses they work with around the terms of PPP loans to make sure they’re a right fit. “We didn’t want people to become saddled with debt that might not necessarily serve them,” said Kareen Boncales of Mountain BizWorks.

There’s some hope that more stakeholders are becoming interested in supporting flexible capital initiatives like the kind described above. The “unsung hero” of the CARES Act federal stimulus package, according to Mountain BizWork’s Moriah Heaney, is a small business default relief fund program that relieves Small Business Administration-backed debt (like PPP) after six months of payments. But for the other half of Mountain BizWorks’ portfolio that doesn’t depend on federally-backed loans or carry debt forgiveness conditions, they’re expecting a default rate of 15-20 percent. That’s significantly higher than their average default rate of less than 3 percent. 

They’re getting some support to weather those swings. “CDFIs that are community aggregators and other regional and state funders are stepping up to provide grant programs that weren’t part of their regular programming specifically to target this issue,” said Heaney. In particular, a partnership between the Appalachian Regional Commission and Appalachian Community Capital is providing equity capital to CDFIs like Mountain BizWorks to help out with the operational expenses of creating higher loan loss reserve pools.

Johnson says they also see a chance to advocate for local manufacturing as Pittsburgh stakeholders express demand for personal protective equipment. 

“It’s gotten us thinking about approaching other organizations and possibly the city to say, ‘Do you need masks for the city and do you need them made locally?’” said Johnson. “They don’t need to buy masks or face shields from China—they can have them made here and we’ve figured out some ways to make that a sustainable proposition.”