Regenerative Finance: Circulation Replaces Accumulation with RSF Social Finance

Updated: Sep 16

Whether you’re an investor or a founder, there are different problems you might encounter in the traditional finance system. For example, investors might worry about fund misuse, while founders find it hard to find investors that are truly aligned with their mission. That’s why RSF Social Finance seeks to solve the flaws of the traditional finance system to help mission-driven businesses genuinely shine.


In this episode, Mindy Christensen explores integrated capital and how RSF Social Finance operates differently from the traditional finance system. She discusses the benefits that community pricing meetings offer investors and borrowers and the different criteria that investors and borrowers must meet. Finally, she explains how debt can be used as a tool for growth rather than something to fear.



If you want to learn about integrated capital and how to leverage debt to grow your business, continue reading!


3 reasons why you should continue reading:

  1. Learn about integrated capital.

  2. Discover the benefits of community pricing meetings.

  3. Find out how debt can be used as a growth tool.

Resources

Episode Highlights


[04:46] Mindy’s Journey


Mindy has been in finance for around 17 or 18 years. Her journey in social finance began in 2014 when she joined Kiva as a fellow of their Zip program and worked on their mobile lending platform.


From there, she was led to New Resource Bank, the first bank to become B Corp. In mid-2019, she joined RSF Social Finance as the Senior Director of Credit for nine months and then became VP of Lending in June 2020.


[06:03] How RSF Social Finance Is Different From Traditional Financial Services


Mindy worked on a lot of different deals in traditional finance and observed that they were not looking at risks holistically. RSF Finance mixes financial and social capital to help social enterprises achieve their missions.


Being one of the earliest funders of social enterprises, they have obtained a deep understanding of social enterprises and a supportive investor community.


“Community Pricing Gathering” is a quarterly meeting that gathers their investors, borrowers, and staff to discuss rates using a community-based model.


[09:05] Defining Integrated Capital


Integrated capital focuses on the idea that a social enterprise comes to them as a whole system with several different needs. The traditional financial system is scattered and distracts a social enterprise’s work.


Their concept of integrated capital means being able to help social enterprises determine the problems that need to be solved through a deep listening process.

“[Deep listening is] really this idea that the social enterprise can come to us and say, ‘Hey, I need help, and I need this much capital. What capital is best for all the different things I need to do and what type of capital is best?’”

Deep listening, a long relationship, and understanding the industry are essential.


[14:17] Community Pricing Gathering


At each meeting, they acknowledge that everyone there wants to make a change in the world and listen deeply to the community. These community meetings create a shared sense of understanding and compassion.


Their strong sense of community and understanding allows them to mitigate risks and create stability in the interest rates. Money is a tool that a community should use to make people’s dreams come true.


[19:28] How RSF Social Finance Finds Investors


Their average investor stays with them between eight and nine years.

“We start all of our conversations by acknowledging that everyone who’s coming to this community is coming because they want to make change in the world. They either want to support the change or they’re making the change.”

All their investors have a shared sense about how the traditional finance system could misuse money, so they find RSF Social Finance when looking for a safe place to put their money.

“Money is just a tool to make people’s dreams happen. It doesn’t need to be the thing that we rally around; it can be the tool that we use as a community.”

They have a mix of investors, including organizations, foundations, and retail investors. The minimum amount to participate as an investor is $1,000.


It’s important to have different investors at their community pricing meetings so they can get different voices with different circumstances to get the best outcomes.

“We invite all kinds of different investors to the community pricing meeting and it’s actually really important that we have kind of different voices with different circumstances because that’s how you get the best outcome.”

[23:50] Defining Patient Capital


For them, patient capital is about understanding the problem of a social enterprise and finding a solution.

“For us, patient capital is about really understanding the problem that the social enterprise is trying to solve and tailoring a solution around that problem and making sure that the covenants that we set in the loan and all those kinds of things rally around the mission of the company…”

Mindy finds it easier to talk about patient capital using examples. Listen to the full episode to hear all about their long-time client, Cooperative Coffees!


[26:15] What Covenants RSF Social Finance Is Looking For


They usually have covenants where they like to see debt service coverage. Sometimes, debt service coverage might not make sense, but the important thing is that the debt is structured so they can repay it in a way that matches their business plan.


Ultimately, covenants are tailored to the particular company’s circumstances.


[27:24] Debt and Modest Growth


In traditional venture spaces, they operate on a scaled growth. People prefer working with RSF Social Finance because it can be an excellent tool for slow growth, and many clients experience hiccups or massive surges.


The growth should fit the model a company is working with.

“There is plenty of small closely held businesses all across the US who are serving a mission in their communities, but who are never going to get to a place and nor should they get to a place where they’re growing two times. Sometimes growth like that doesn’t fit every business model…”

Debt is perfect for modest growth, while equity is best suited for sales and marketing. When taking on debt, you must match either the assets or revenue growth to the size of the debt.


[33:54] Assessing Borrowers


It uses some of the 5 C’s of credit; character is the most important. The relationship with an organization and its leaders is crucial because the borrower's commitment will allow them to navigate through difficult times.

“Because businesses and organizations will go through time periods and situations where things get tough, where the cash flow gets strained or the collateral value changes, those things change and shift. But really what’s important to us at RSF is this borrower, is the leadership team of this borrower going to be able to walk with us through tough times?”

They’re currently participating in Underwriting for Racial Justice to break down the five C’s of credit and how to properly use them to help clients. They have a credit policy that can be shifted to work with their board and investors.


[39:38] Expected Financial Maturity


For them, two to three years is the minimum.

“Plan for maximum success and get all of that squared away, straight away. So you don’t have to go back and clean it up.”

They also want borrowers to be able to produce their income statement, balance sheet, and cash flow statement. Borrowers must have a deep understanding of their business model and finances.

“If you’re trying to solve a social and environmental mission, financial sustainability has to be a part of that, right? Otherwise, we can’t make the change that we want to see in the world.”

Businesses should work with a fractional CFO because they can get you on the right track right away regarding financial statements, cash flow, processes, etc.

“Finance, money, taking on debt doesn’t have to be this big, scary, bad thing. It can be a really regenerative restorative process, for you and for your business.”

About Mindy

Mindy Christensen is the Vice President of Lending at RSF Social Finance. She oversees all aspects of RSF’s lending programs, including business development, relationship management, and credit risk. She’s also an advisor for ICA Fund Good Jobs and TMC Community Capital. Prior to the finance system, she worked for New Resource Bank and was First Vice President of Amalgamated Bank. In her free time, she enjoys travelling, hiking, and scuba diving.


If you want to know more about Mindy, reach out to her on LinkedIn. You can also check out RSF Social Finance to find out more about her work.


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