Laurie Michaels, clinical psychologist and philanthropist in Aspen, Colorado, founded the Open Road Alliance eight years ago to help nonprofits and social enterprises working in any industry or country overcome unforeseen obstacles to funding.
“We sometimes call our job the daily emergency room of impact – our borrowers come to us in times of crisis when something beyond their control has gone wrong,” says Maya Winkelstein, Managing Director of the Open Road Alliance, a philanthropic organization. New York-based initiative.
With the spread of Covid-19 across the world, “our emergency room is full,” says Winkelstein.
The first coronavirus-related call came about two weeks ago, then there were 30 more, and now “more are coming in every day,” she says. “From our experience and from our perspective, this is reaching the proportions of a natural disaster. It’s even worse than an earthquake or a hurricane because it’s global and it’s not confined to just one geography.
Until recently, Open Road was funded solely by Michaels, who has so far provided $ 38 million in grants and short-term loans as part of the initiative. All funding is intended to fill unexpected funding gaps, whether caused by changes in government regulations, a natural disaster or even a human problem, like the true story of an investor who disappeared on his boat in Mediterranean for six weeks before signing. paperwork to move an investment cycle forward.
It is also not unusual for a nonprofit organization operating on clinical trial drug grants to face a change in government regulatory requirements that adds millions of dollars in additional costs to it. test. In this case, Open Road can provide a grant to fill the gap.
“You usually can’t go back to the original licensor for additional funds, the money may not be fungible initially, or it is severely limited,” and, says Winkelstein, “nonprofits don’t are not known for their strong cash reserves. ”
In scenarios where a nonprofit has funding, but experiences an unexpected short-term cash flow shortage, Open Road offers bridging loans. Its Open Road Ventures fund, launched in 2017, lent US $ 23 million to 75 social impact organizations.
“Our message to other impact investors is that it’s time to take a calculated risk,“
Last week, the organization closed for the first time an impact fund that includes outside co-investments. The Open Road Impact Fund, which currently totals $ 10.5 million, aims to reach $ 40 million within a year.
These funds – for short-term bridging loans – could be useful to the dozens of organizations contacting the initiative in the wake of the economic disruption caused by the Covid-19 crisis.
“We have received inquiries in all sectors and geographies, from human rights to agriculture, access to energy, education and health care, everyone is affected, ”says Caroline Bressan, Managing Director who oversees Open Road’s investments.
A large impact research organization was waiting for some big grants to continue, and now that the timing of those decisions is uncertain, it is therefore asking for a bridging loan to get through this time, Bressan said.
Another organization that sends teachers to the US and UK to Africa for the summer to co-teach lost revenue overnight as teachers canceled or delayed appointments. In some cases, nonprofits and social enterprises depend on government funders who only disburse funds to organizations when they reach certain milestones.
“Now that things are slowing down, disbursements [these nonprofits] thought they would arrive on May 1 or June 1, don’t come, leaving them with a cash shortage, ”Bressan says.
The average duration of an Open Road bridging loan is around nine months. About 80% of loans are granted to international groups, with rates between 6% and 10% for social enterprises. The rates are lower for domestic companies and for non-profit organizations they reach a maximum of 5%.
Earlier this week, Open Road had a call with the nonprofit Global Impact Investing Network (GIIN) and around 100 other impact investors to advocate for short-term funding for nonprofits and to social enterprises as soon as possible, to ensure the work in progress. do not fall into disuse.
“Our message to other impact investors is that it’s time to take a calculated risk,” Bressan said.
“We encourage people to take a portfolio approach,” she says, adding that they have to ask themselves, “how much capital am I willing to risk to keep this growing impact or to maintain the impact line? ? ”
In times of crisis, it is tempting for venture capitalists or private equity investors to freeze their investment pipeline. But with impact investments, a freeze “will have ripple effects,” says Winkelstein. “When the crisis is over, there will be a second crisis. This is the investor element that we discuss with our peers.
Reducing the economic fallout for impact businesses through the use of bridging loans, and perhaps other means, is one way the impact investing community is likely to respond, said Amit Bouri, CEO of GIIN .
“We’ll see more and more activity like this — trying to help high-impact companies maintain their operations in the midst of high market volatility,” Bouri said.
“My hope and expectation is that impact investors can be part of the response to help limit the damage from the crisis itself,” he adds. “And then, they can play an important role in the wider global recovery. “