Throughout the pandemic, foundations have been rapidly responding to community needs in a variety of ways. We have seen an emerging theme across the funder landscape when it comes to relief efforts: the use of loan programs to support nonprofits and small businesses.

The Community Foundation for Muskegon County announced on Thursday that it has partnered with Grand Rapids Opportunities for Women (GROW), a nonprofit focused on supporting entrepreneurs, to create a loan program for businesses in Muskegon County that have been directly impacted by COVID-19. The Muskegon County Recovery Loans will provide $1,000 – $10,000 loans at a 4% interest rate.

“This program will provide critical, flexible funds to those small businesses impacted by COVID-19,” Todd Jacobs, president and CEO of the community foundation said. “The program is designed to keep small businesses afloat and to reopen with confidence.”

Funders across different regions are seeing the success of low-interest loan programs to further their impact in addition to their grantmaking and other pandemic response efforts.

The Ann Arbor Area Community Foundation (AAACF) recently announced the first recipients of its short-term cash flow loan program. The program provides short-term (up to 180 days) cash flow loans of $5,000 - $50,000 as part of the community foundation’s response to the COVID-19 health and economic crisis. AAACF shared on its website, “We plan to keep launching new ways to support the nonprofit sector with philanthropic capital.”

The Saginaw Community Foundation (SGF) used social impact investment funds to create a loan program for small businesses impacted by COVID-19. The community foundation recently told CMF it was looking to do the same for businesses impacted by flooding in the region.

In the early stages of the pandemic, Michigan Women Forward (MWF) launched its COVID-19 Entrepreneurship Program to provide entrepreneurs with loans to ensure their businesses can continue operating during this time. MWF later went on to partner with the Michigan Economic Development Corporation (MEDC) in the creation of the Michigan Entrepreneur Resilience Fund. The Michigan Entrepreneur Resilience Fund, has since been funded by several CMF members and provides microloans and recovery grants to small businesses.

In March, the Midland Area Community Foundation (MACF) announced a $1 million pledge across two funds, the COVID-19 Response Fund and the COVID-19 Impact Investing Fund to provide relief to nonprofits, individuals and small businesses. The Impact Investing Fund will provide a total of $250,000 in 0% business loans for small businesses, with a loan maximum of $5,000.

The New Economy Initiative (NEI), which is housed within the Community Foundation for Southeast Michigan, launched NEI’s Small Business COVID-19 Loan Relief Program to provide six months of loans for 300 borrowers in Detroit, Hamtramck and Highland Park to help preserve their businesses during the crisis.

In her recent impact investing blog, Jennifer Oertel, CMF’s impact investing expert in residence discussed how impact investing can be an effective tool for economic recovery amid COVID-19.

“Impact investing, such as low-interest and patient capital loans, can get even more capital to individuals and businesses in need to help them bridge this crisis,” Oertel writes. “As opposed to the 100% financial return of a grant, lenders can expect a return of, and on, their money and we know that on an overall basis, such loan programs typically have very high repayment rates.”

As for the latest effort led by the Community Foundation for Muskegon County, the community foundation shared that “the loan program will support a breadth of area businesses in a variety of industries - from retail and daycare providers to manufacturers and restaurants - as they prepare to navigate a new normal.”

Want more?

Learn about the Community Foundation for Muskegon County’s new loan program.

Connect with Jennifer Oertel, CMF’s impact investing expert in residence.

Read Oertel’s blog: The A to Z of Impact Investing.