Worthy Bonds have afforded me another avenue to be connected with “Main Street” business lending. This platform is paying me 5% interest on 36-month bonds. Worthy uses that capital to make asset-backed loans to small business owners in the U.S. for whom that particular type of credit makes good financial sense. I love that the bonds begin at $10. It’s been great to introduce this opportunity to young friends and to folks I know who’ve believed that investing is only for the rich.
Several years ago, I learned about another investing avenue that could connect me personally to borrowers: peer-to-peer lending. I joined Lending Club. At the time, it offered opportunities for investors to create a portfolio of loans comprised of hand-picked borrowers. (That part of their program no longer exists.) In this instance, I didn’t know the actual name or face of the borrower. But I could review specific loans filtered by several variables (purpose of the loan, whether the borrower was employed, prior delinquencies, and other items). This gave me a chance to create a portfolio of the borrowers I was most interested in serving: working people of modest salary who’d turned to Lending Club in an effort to get out of debt. They had consolidated their debt into a single loan from Lending Club at a more favorable rate. During the four years I was active in Lending Club, only a couple of “my” borrowers defaulted. On the whole, my returns were positive, and I had the satisfaction of knowing that I had played a small part in helping a few dozen people to get out of debt.
In just the last couple months I’ve had the opportunity for another kind of relational investing. Urban Lazarus is a small real estate company in San Antonio led by Ram Gonzalez. A former city government official, he currently heads a local community development corporation for the city’s west side. Gonzalez wants to help Hispanic small business owners who have been unable to access mainstream credit become first-time home buyers. He does so by finding the right kind of starter houses, matching them with buyers and providing owner-financing arrangements. Investors like me join Ram in holding the property notes while these buyers develop a solid mortgage repayment history. We earn some income through our secured promissory note while the buyer (who typically has been slowly improving their property) establishes the track record allowing him or her to eventually refinance with a “real bank” at a lower interest rate. At that time, we investors get our capital returned.
Modern Day Gleaning
Over the years I have found that longstanding ministry relationships have also afforded opportunities for impact investing with a personal touch. For example, in 2013 I contacted the head of Belay Enterprises in Denver. I asked him if, alongside my charitable gifts, I could make an investment in any of the ventures with which he was connected. It turned out he had been thinking of integrating that approach. Ultimately, the ministry issued me a promissory note at 3% interest on a $20,000 loan to help some social entrepreneurs launch a new coffee shop employing homeless youth. Admittedly, for many nonprofit ministries this kind of thinking beyond charitable donations is foreign. But there are entrepreneurial ministry leaders out there. There are also nonprofits that have created for-profit social businesses or are training and coaching minority, “second chance,” and immigrant entrepreneurs (e.g., Hustle PHX, Minority Entrepreneurship Institute, Prison Entrepreneurship Program, and Rising Tide Capital). Through these organizations it is possible to get connected to grassroots business leaders eager for affordable investment capital.
Investments of this sort typically offer concessionary returns (e.g., one to three percent). Accepting this is a way of practically applying God’s gleaning regulation (see Leviticus 19:9-10). This was God’s charge to those who owned land (a form of capital) to leave the edges of their fields unharvested. Those sections were to be left for the able-bodied poor who didn’t own land. Concessionary loans “leave some margin in the field” so our neighbors can benefit. They provide high relational dividends with modest financial reward. In Part 2, I will describe some other strategies that are a bit less directly personal yet still reflect the principle of other-centered investing.