I’m excited to announce that tomorrow, Monday October 3rd, Capital Good Fund will launch its first major out-of-state expansion and begin offering loans to residents of the State of Florida! As many of you know, we are in the midst of a major scaling plan that calls for us to finance 17,000 loans over five years so that we can become operationally self-sufficient through earned-income. As part of that plan we’ve always intended to grow to another state for two primary reasons:
- Rhode Island is not a big enough market to hit our loan targets
- There is only so much philanthropic (charitable) or loan (debt) capital in Rhode Island, whereas in other states with a larger population and more wealth, there are more banks, foundations, and high-net-worth individuals we can approach for funding
Earlier this year we did an analysis of the other 47 contiguous states (plus the District of Columbia) and settled on Florida for expansion because:
- It has a large predatory lending problem that we can compete against, including $2.2 billion in payday lending volume from 1,400 licensed payday lenders. On average they charge 278% APR.
- One of our focus areas is lending to immigrants, especially to cover immigration expenses that can cost anywhere from $500 to $10,000, depending on the adjustment of status they are seeking. Florida has one of the largest immigrant populations in the country and about 200,000 Floridians per year either become naturalized U.S. citizens or legal permanent residents.
- We have developed a strategic partnership with the National Council of La Raza to provide immigration loans through their affiliate network. NCLR has 14 affiliates in Florida, meaning that we have a ready-made network of community partners through which we can reach potential borrowers.
- Auto-title lending, which is a particularly predatory loan product, is legal in the state (unlike in Rhode Island), presenting an opportunity for us to develop a new loan that is equitable and can save borrowers thousands of dollars in interest
- Many of the banks that fund Community Development Financial Institutions (CDFIs) like us–JP Morgan Chase, Citi Bank, Wells Fargo, Bank of America–have a large footprint in Florida, whereas they either don’t make investments in Rhode Island or, if they do, they are minimal
- There is a lot of wealth in community foundations, family foundations, and high-net-worth individuals that we can approach for funding.
- The lending laws make it possible for us to charge sustainable interest rates, and it is not overly onerous to secure a lending license. In contrast, many states, such as Connecticut, have interest rate caps (12% APR in CT) that make it impossible for us to cover our costs while making small-dollar loans. Other states, like California, have complicated laws that require expensive legal assistance and a lengthy regulatory review. In Florida we can charge roughly the same interest rates as in Rhode Island and it took less than $1,000 and three months to secure our Consumer Finance Company lending license.
What Happens Now?
Well, starting tomorrow Florida residents will be able to access our Emergency Loans of $300 – $500 and Other Consumer Loans of $700 – $2,000. Initially, we will be online-only–our entire process can be done so long as you have access to at least a web-enabled smartphone–and then starting in November our goal is to have an on-the-ground employee who will do community outreach and process loan applications. However, given how large the state is (20X the population of Rhode Island!) we expect that the vast majority of our lending will be done online, over the phone, and via community partners like NCLR Affiliates, United Ways, and other community agencies.
The next step is for us to apply for a Motor Vehicle Retail Installment license which will allow us to offer Car Loans, and our goal is to have that product up and running in November. In the meantime, I will continue to travel to the state (I have already made three trips) to build partnerships with community agencies and funders, and we will begin to market our services through those partners, earned media, and online advertising. Most importantly, we hope to close our first Florida loans this month, and we are very excited to start changing lives in a state that is in need of our services! We have been blown away with the response so far: dozens of organizations have expressed their excitement about our expansion, noting that there is a multi-billion-dollar need for our products and services and that there are no real alternatives in the state to payday lenders, auto-title lenders, subprime auto lenders, rent-to-own stores, pawnshops, etc.
In short, this is another step on our journey toward becoming a self-sufficient organization that is one of the fastest-growing, well-run, and life-changing nonprofits in the country!
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