While the COVID-19 pandemic meant less business for most people, for the staff at SOAR (Seeing Our Adolescents Rise), referrals began coming in fast and furious.

“In December 2020, we were getting more referrals than ever before to work with youth,” says Chantae Thomas, SOAR’s executive director and founder. “We were struggling to pay our team.” In fact, at the time she thought: “I don’t know how long we can hold this ship afloat.”

Enter the Metro Denver Nonprofit Loan Fund, a zero-interest fund administered by Nonprofit Finance Fund (NFF), a New York-based CDFI that works with nonprofits across the U.S. The fund was seeded with $1 million each from Rose Community Foundation, Community First Foundation and The Denver Foundation and covers a seven-county region in Denver.

One of the most significant benefits of zero-interest loans is that they allow nonprofits to cover their expenses until other access to other funds become available, says Trella Walker, NFF’s interim CEO who also helped design the fund program.

That certainly was the case for SOAR, which provides therapeutic outdoor activities for at-risk youth; many of whom have been part of the juvenile justice system. The nine-year-old nonprofit received its first government contracts in 2018. Then, in 2020 as COVID raged, referrals skyrocketed by as much as 60 percent over the previous year, from four to five a week to 10 to 14 a week. That increased demand from the city, state and judicial system also meant SOAR was only being paid once a month; usually a month after the nonprofit had rendered services.

SOAR wasn’t the type of entity that commercial banks were eager to lend money to. Slow government payments and lack of access to borrowing became a growing problem.

“We couldn’t hire and couldn’t maintain our tech and we were behind on pay because of how government contracts work,” Thomas says. “My co-director said we just need to find funding to get us over the hump.”

Thomas found that funding when her application to the Metro Denver Nonprofit Loan Fund in May turned into a $25,000, zero-interest loan along with technical assistance in late August.

“So many nonprofits were struggling,” says Emily Weissman, NFF’s senior investment officer who leads the team managing the loan fund. The loans have gone out to a mix of organizations, from human services, to health, housing and civil rights. “It really has been diverse,” Weissman says.

The loans are flexible in a number of ways, including no collateral and offering multiple repayment options, ranging up to 48 months. This can help organizations to build a track record of borrowing. NFF did not clarify how they enforce repayment, but said they’re committed to working with the nonprofits should anything change that hampers their ability to repay the loans.

No-interest loans aren’t new, and this is one of a number of funds that NFF helped launch during the pandemic. That experience and its national reputation is why NFF was chosen to manage the program, explains Lindy Eichenbaum-Lent, president and CEO of Rose Community Foundation, one of the three foundations to fund the zero-interest loan program.

Typically, the program’s loans are between $50,000-$250,000, Lent says, but can be less for small organizations.

“We want to help these nonprofits stabilize and be sustainable and have an opportunity to develop new revenue sources,” Lent says.

When the Denver area closed down because of COVID, the philanthropic sector had a real sense of urgency since nonprofits serving communities of color were being hit so hard. Initial PPP loans relied on traditional banking relationships that small nonprofits didn’t have. A statewide COVID relief fund was launched with foundations still doing their own individual grant-making.

“It felt like there was an opportunity to do more and use every tool in the toolbox,” Lent says. “The idea was: Let’s create another resource vehicle for the community and prioritize organizations serving communities of color and might be on the smaller size and might not be the usual suspects for loans.”

Of the loans issued to date by the Metro Denver Nonprofit Loan Fund, nine of the 14 loan recipients are organizations led by people of color, and at least 11 out of the 14 are focused on serving people and communities of color. There were six loans in the first round and eight loans in the second for a total of $2.46 million so far. Another round of loans are slated for early next year. The total loan fund now stands at $3.2 million.

The fund’s first loan was made in March 2021 when NFF closed a $100,000 working capital loan to Athletics & Beyond, a Denver-based sports-based youth development and college readiness program.

These zero-interest loans, says NFF’s Walker, are “going to make a difference and will continue to make a difference.”

It already has for SOAR. Its staff has doubled from seven to 15, plus a couple of interns.

“We were paying staff once a month for everything, including insurance and other bills,” Thomas says. “Everything was a month behind unless we got a grant that month. Now we are slowly transitioning the pay date to the 15^th. … We’re anticipating that by February we will be on a bi-weekly pay structure.”

This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses of equity, public policy and inclusive community development. The series is generously supported by Partners for the Common Good. Sign up for PCG’s CapNexus newsletter at capnexus.org.

Editor’s note: We’ve corrected the location of Nonprofit Finance Fund’s headquarters.