In 2016, OFN member Fahe received $50 million in loan awards from the USDA Community Facilities Relending Program to pursue its mission: ending persistent poverty in Appalachia. Among its numerous initiatives, Fahe sought to build several community facilities, including daycare and opioid-addiction rehabilitation centers.
However, a key barrier hindering the deployment of the USDA’s Community Facilities capital is not being able to use awards for construction projects. Borrowers must find other sources of construction financing, complete the project, and only then tap into the government’s long-term loans.
The timing was also sensitive, as these USDA funds must be drawn by September 30, 2021. Fahe needed construction money, so it turned to fellow OFN member Virginia Community Capital (VCC) to accomplish its goals.
VCC then turned to another partner: the Mary Reynolds Babcock Foundation, a nonprofit with a mission to lift Southerners out of poverty.
“We have had a relationship with the Babcock team for years and knew they were pretty innovative in how they approach their investment strategies,” said Caroline Nowery, Director of Community Investments at VCC. “We had been talking about ways to do that, and then this opportunity came up.”
“We’d never done a participation loan before, so it took us a minute to make sure we understood and knew what we were getting into,” said Jennifer Barksdale, the Babcock Foundation’s senior finance officer. “Once we got into the details with VCC, a team we trust, we realized this participation loan was actually less risky than some of our direct loans.”
Fahe’s loan ties into the Babcock Foundation’s management of a grant pool for the Uplift America Partnership, a collaboration of government, philanthropic, and finance organizations to address poverty in rural America by directing capital toward needed community services and strengthening community-based lenders.