Mission-aligned financing drives business and impact growth
Aug 3 2021
A funder that’s all in on your mission might seem like a nice-to-have option, but when you need help to stay on track and advance your goals, it’s essential
By Mindy Christensen
When you hit a rough patch, will your lender pull out all the stops to help you through it? If you want to do something unconventional to advance your mission, can you get financing for it? If you have an unusual opportunity, will your lender step up quickly to help you seize it?
That kind of relationship is hard for any small to midsize business to come by, but it can be especially hard for sustainable businesses and social enterprises—and yet for them it’s even more crucial.
Unlike conventional lenders, which are generally risk averse and provide financing solely to generate monetary returns, funders that are all in on your mission are also investing in your impact. They’ll go above and beyond to find solutions to mission-related challenges that traditional lenders won’t touch. And payments on your debt will support other enterprises that contribute to a more socially just and environmentally sound economy.
The pandemic proved the value of supportive funders—but All Good, Guayakí Yerba Mate and Belay Enterprises say their experiences working with RSF Social Finance have shown that the benefits of mission-aligned finance extend well beyond a crisis.
All Good: Fast funding to meet the moment
When All Good, a climate-friendly, woman-owned skin care brand, first came to RSF for funding, it was working to align all its vendors with its mission. It had previously received funding from a traditional bank but had ended the relationship after being shuffled around between different managers without receiving the thoughtful help—and trust—it needed to grow. All Good’s team was glad they’d made the switch long before the pandemic hit—but when it did, RSF proved the true value of mission alignment.
Before COVID-19, All Good’s most popular products were eco-conscious, reef-friendly lotions and sunscreens. It also sold hand sanitizers, but only a limited amount. When hand sanitizer became a high-demand product in spring 2020, All Good ramped up production as quickly as possible to provide access to those who really needed it, including teachers, fire departments, local community services, and consumers.
“The size of our orders more than quadrupled,” says All Good CFO Susan Steeb. “We went from selling cases to truckloads. We needed upfront cash to keep up with demand and, to our immense relief and gratitude, RSF extended our line of credit based on demand and our ability to meet it.”
The jump from $500,000 to $2.5 million was a significant ask—one a big bank would have been hesitant to provide. But RSF recognized the need to respond quickly and even offered All Good an over-advance, which gave the company free rein to draw on the line as needed without having to worry about the timing of sales.
With RSF’s help accessing capital and building relationships, All Good kept its 25 employees on staff and allowed its manufacturers and partners to stay open—all through the production of one SKU. Its increased production capacity also opened channels the team had never imagined possible with government agencies, public schools, prison systems, municipalities, and more. The company even worked with a partner to provide 7.5 truckloads of sanitizer to tribal nations.
“Mission-aligned financing empowers us in ways I couldn’t have imagined,” says All Good founder and CEO Caroline Duell. “Just sitting in the Community Pricing Gathering made me feel valued rather than burdensome. I got to connect with other borrowers and hear about all the ways that RSF’s approach benefits their business. Listening to the investors talk about their focus on value beyond financial return was incredibly heartening. I came away knowing that they genuinely wanted to support our mission.”
“No matter what hits us,” Duell adds, “I know when I pick up the phone and call RSF, I’ll be met with, ‘Let’s figure this out.’”
Guayakí Yerba Mate: Capital for mission advancement
Guayakí Yerba Mate is a beverage company that sells organic, fair-trade yerba mate tea leaves and canned drinks and seeks to restore 2 million acres of South American rainforest by 2030. Since its launch in 1996, Guayakí has gone to great lengths to ensure it has a healthy supply chain that promotes the well-being of the land and the people who make its mission possible.
Yerba mate grows naturally on shaded land in the Upper Paraná Atlantic Forest, which stretches across Argentina, Paraguay, and Brazil in regions that have been heavily deforested since the 1900s. Guayakí’s founders initially aimed to conserve what was left of this endangered habitat but changed course after realizing the damage was too great to rely on conservancy alone.
Now the company works exclusively with small-scale local growers to farm responsibly by raising solely shade-grown plants and reforesting devastated areas with native hardwoods. Guayakí pays farmers a premium price to grow yerba mate, allowing living wages, creating healthy working conditions, and helping to fund community development projects for local predominantly indigenous communities.
The broad scope of Guayakí’s efforts means the company needs to be highly adaptable. “Our business model has changed quite a bit since we launched,” says Guayakí chairman and co-founder Chris Mann. “About 20 years in, we started doing our own distribution, which is a very uncommon move for small players in the beverage industry. It gave us a lot to work through financially, but in the end it allowed us to follow through on our mission by using electric vehicles and working with system-affected people, including formerly incarcerated people and those affected by historic and systemic oppression.” Some of those employees, Mann says, “started as drivers and are now working their way up.”
In early 2020, Guayakí was positioned for another growth spurt and was in the midst of an equity capital raise linked to its RSF loan. Then COVID-19 hit, leading to a series of delays. “RSF was a fantastic partner the whole way,” Mann says. “They worked with us to offer many extensions.”
“Mission-aligned financing means you have a partner that’s not in it just for the money, like we’re not in it just for the money,” he adds. “We need to be a profitable business. Income is a critical part of being a sustainable business—but it’s only one part. We’re now really in a position to accelerate our growth and commit to deeper action in the communities we work in.”
Belay: Funding room to grow
Belay Enterprises is a faith-based social enterprise with a self-described “bad business model”: It incubates budding social enterprises until they’re economically viable enough to spin off on their own. It also employs and trains people struggling to find work after experiencing homelessness, incarceration, or addiction. Belay can do this in part because its flagship project, secondhand home improvement supplies shop Bud’s Warehouse, is remarkably successful.
Belay became an RSF borrower in 2016 when Bud’s Warehouse outgrew its original rented facility. “When we met Belay, Bud’s Warehouse was already bursting at the seams and the interstate was set to expand literally into their front door,” says RSF Social Enterprise Lending Manager Reed Mayfield. “After learning about their amazing mission and their facilities challenges, we immediately began exploring how RSF could be a financial partner.”
Unfortunately, at the time, Belay did not have funds on hand to meet RSF’s loan-to-value requirements. It needed flexible capital, and RSF found it. RSF worked with Belay to build relationships with community organizations willing to put down significant sums of money to fund the project through creative subordinated debt that would not be repaid if Belay defaulted.
The process was a race to the finish line. Mayfield and RSF Senior Credit Manager Neha Kapur designed a finance structure, helped answer questions from community members, and produced loan documents just in time to close the loan on the day Belay purchased its new building and the sales agreement expired. “It’s a great example of using an integrated capital approach in collaboration with the community,” says Mayfield.
The purchase was a resounding success, providing Bud’s Warehouse with twice its original operating space for less money than it was paying to rent its old facility. And since Belay’s recent loan refinancing, many of the community members who contributed money for the purchase have been repaid and can now reinvest in other social enterprises. Others donated their entire principal investment to Belay, enhancing its financial backbone.
When the pandemic hit, Belay CEO James Renier was glad they had stayed with RSF despite having a slightly better offer on the table. As a countercyclical business, Bud’s Warehouse is poised to do well when the economy dips. But, Renier says, “we had no road map for this. Knowing that RSF was there for us gave us a sense of security and the freedom to take some new risks that paid off in spades.”
One of those risks was a total restructuring of Bud’s Warehouse’s operations. Reiner had thought for years about featuring Bud’s inventory online, but he never did because he knew its limited catalogue—as a secondhand shop, it often has only one of any given item in stock—would pose a challenge. However, when lockdown regulations necessitated a shift to online sales with curbside pickup, Bud’s Warehouse decided to give it a go.
The results were overwhelmingly positive and, even with COVID-19 restrictions lifted in some areas, new customers continue to shop on the website and drive great distances to pick up their goods.
“We didn’t know how much our standing would change after buying the building,” says Renier. “But it did. We now have physical and financial room to grow, and the way RSF set up those relationships with our lenders never would have happened with a traditional bank. We’re incredibly excited about the future and wouldn’t be in this position without RSF.”
A model for now—and for the future
The greatest benefit of working with a mission-aligned lender like RSF is the focus on building relationships that help social enterprises grow by overcoming obstacles that go beyond just financial hurdles. This benefit is central to RSF’s partnerships with All Good, Guayakí Yerba Mate and Belay Enterprises, none of which would have received the same care and attention from a traditional lender.
One example of the relationship building that RSF helps facilitate is its Community Pricing Gatherings, which bring together borrowers, investors, and RSF staff for quarterly conversations that inform the RSF Prime rate. These gatherings help borrowers connect and form relationships with investors who fund loans, resulting in a community committed to triple-bottom-line success as opposed to focused solely on financial return.
For social enterprises, mission-aligned lenders provide more than just financing. They offer flexible funding to help their borrowers grow their business and further their mission by finding creative solutions that work for all parties and that lead to improved outcomes for people and planet.