A Loan to Help the Homeless
After scrubbing the bathroom and floors at his job with Immaculate Cleaning Service (ICS), Charles Townsend doesn’t mind cleaning his own apartment. It wasn’t so long ago that Charles slept in a shelter because he’d been out of work for over three years. A steady part-time job gave Charles the income to be eligible for subsidized housing and a normalcy that once seemed beyond his grasp. It’s all because someone he never met made a $37,000 interest-free five-year mission-aligned loan to start the social enterprise where he works in Philadelphia.
Depaul USA, a nonprofit committed to helping the homeless, wanted to start a cleaning franchise to generate revenue to supplement government and foundation funding. With no track record, no collateral and no experience, getting the loan was a struggle—until the Patricia Kind Family Foundation (PKFF) stepped in. Despite a small endowment, the foundation makes a major impact in the Philadelphia area by aligning nearly its entire $35 million corpus with its mission to support local organizations that help people in need obtain health care and related human services, including food, shelter, clothing, and education.
“The business wouldn’t have happened without that loan,” said Charles “Chuck” Levesque, Depaul USA President/Executive Director.
Right Resources, Right Time
The decision to make the loan took only days for PKFF trustee Laura Kind McKenna, who believes in careful vetting, responsiveness and working with borrowers. Laura suggests her peers look to their well-honed models of making grants rather than worrying about not having the expertise or staff.
“To make a loan that’s mission aligned, do the same due diligence that you’d do for a comparable sized grant,” Laura said. “The basic mission of a philanthropic foundation is to make the world better. If you really care about your mission, you’ve got to be putting more than five percent of assets toward this.”
The loan agreement with Depaul was two and a half pages. Chuck says he’s written more for grants, and smaller ones at that. In simple terms, the borrower agreed to provide quarterly performance updates with annual payments coinciding with the time when donations peak. The last payment was made on time April 2017.
“Don’t drag out investment negotiations over months of years,” Laura said. “The borrower will miss access to capital at the time it’s needed. Don’t require them to jump through as many hoops as any other business loan.”
Receiving a loan rather than a grant gave Depaul added incentive to succeed and overcome minor business obstacles. The loan commitment provided additional motivation with the knowledge that repayment could lead to potentially other grants or loans.
Returns That Keep Giving
The cleaning franchise is returning a double bottom line for Depaul USA with its revenue stream supporting Depaul House to transition homeless men off the streets of Philadelphia. The commercial cleaning service also provides stable jobs for Depaul House residents, one of the only ways to exit homelessness for adults who aren’t disabled.
Since the loan was made in 2012, ICS has generated a total revenue of $350,000, paid wages in excess of $205,000 and generated a profit of $50,000 for Depaul House. The success of ICS has also led launched two other social enterprises.
“With ICS, we learned a lot about a social enterprise,” Chuck said. “It was a whole new field for us. And we’ve created two other enterprises based on the experience from that loan.”
Today, Depaul USA operates a high-end thrift shop in Macon, GA, and a for-profit reality providing low-income housing in St. Louis. The Depaul USA board would like to start social enterprises at each of its other sites in Chicago, New Orleans and Little Rock.
PKFF has been repaid its entire $37,000 investment to use for other loans or grants. The cleaning service loan was the foundation’s first direct loan that was mission aligned but far from the last.
That loan is making the future a little brighter for men in Philadelphia who now have jobs and a path forward out of homelessness.
For Charles, the ICS management and his case manager worked with him, recognizing he liked to work uninterrupted. Charles was promoted to clean a building on his own, and in 2017, he was promoted again to be the lead on a new contract. Charles says that ICS has been a “blessing” and that working has helped his self-esteem.
The money ICS earns is helping brighten the days ahead for more people like Charles. With the help of foundations like the Patricia Kind Family Foundation, other mission-aligned loans can have similar human and financial impact.