Nonprofit microlender the Capital Good Fund was founded by Andy Posner, who recently graduated from Brown University with a master’s degree in environmental studies. The fund, based in Providence, makes loans of between $500 and $3,000 to entrepreneurs and immigrants interested in applying for U.S. citizenship. Posner, the fund director, recently answered a few questions about the venture.
PBN: Give us the details about the fund.
POSNER: Our mission is to create a poverty-free, inclusive green economy through innovative microfinance. We provide loans and workshops to lower-income Rhode Islanders for a variety of purposes so that they can better their lives, their communities and the environment. Capital Good Fund is the only lender in Rhode Island that makes unsecured loans with no minimum credit score requirement.
The best way to illustrate what we do is to talk about our borrowers. Take Curtis Gomes, for instance, who graduated from our business basics workshop (which we hosted in partnership with the Providence Housing Authority), and then took out a small business loan from us. All he needed to get his general contracting business off the ground was $3,000 to purchase insurance, some tools and a computer. Or, consider the case of Toni Lynn Bonadie who, with a $750 loan, started a yoga company. There is also Ducy Cornejo, who took a $3,000 loan to start an environmentally friendly cleaning company a year ago and, after paying off her first loan, has now taken out a second, larger loan, in order to expand the business. These are just three examples of the 29 life-changing loans we have made to date.
PBN: What are your lending criteria?
POSNER: We have a set of four qualitative underwriting criteria that we use to evaluate the loan applicant. We also have group loans where a group of people get together to support each other’s businesses; in those cases, the group decides who is approved for the loan.
The questions we look at are: 1) Do they need the loan? 2) Can they afford the loan? 3) Are they likely to repay the loan? 4) Are they likely to succeed with the loan?
To answer these questions, we look at a basic business plan, references, character, credit, etc.
Out of the $47,625 lent out, we have only written off $1,500.
We currently have more than $50,000 in our loan pool. That won’t need to be replenished because our default rate is so low.
PBN: Who has supported Capital Good Fund?
POSNER: The support of Brown University has been absolutely essential. In particular, Alan Harlam and the Swearer Center for Public Service have provided us with financial, moral and intellectual support. In addition, we wish to thank Kurt Teichert and the Community Carbon Use Reduction at Brown program for supporting our innovative, energy-efficiency loan program – the DoubleGreen loan – as well as the Small Business Development Center, English for Action, the International Institute of Rhode Island, Providence Housing Authority, the R.I. Economic Development Corporation, to name a few.
PBN: How does Capital Good Fund fit into the broader social enterprise landscape in Rhode Island?
POSNER: I’ve heard other entrepreneurs describe Rhode Island as a “petri dish” for new ideas, and I couldn’t agree more. I came here from Los Angeles to get a master’s degree, and by the time I graduated I knew that I had to stay. After all, where else can someone get such easy access to so many business, political and community leaders? Rhode Island is small enough to be manageable yet big enough to offer all the things an entrepreneur needs: a community of intelligent people, challenges that need to be addressed, and proximity to larger markets (e.g., Boston). That’s why I am proud that fund was part of the first graduating class of the Social Venture Partners of Rhode Island’s Change Accelerator program. I see Rhode Island as a hub of social enterprise nationwide – a trend that will create jobs and attract investment in the state.
PBN: What role do you see microfinance playing in addressing the economic crisis Rhode Island is facing?
POSNER: The beautiful thing about microfinance is that it allows people to take charge of their lives and their destinies; rather than hope that someone hires them, our borrowers start or expand business ventures in order to make a living on their own. It never ceases to amaze me the extent to which our borrowers – who are people that have been disadvantaged in myriad ways throughout their lives – are eager to help others in their communities through entrepreneurship. So the benefits of our loans are tremendous: They allow people to increase their income immediately and create jobs for others; they provide hope and opportunity at a time when both are lacking; and they even save taxpayers money by reducing the need for public benefits.
Now, microfinance isn’t a silver bullet. But when you think about how many people are seeking jobs compared to how many jobs are out there, the numbers are simply daunting. These microbusineses are an important part of the economic recovery and, once established, they help to create a dynamic local economy that will be more protected from future economic shocks.