How impact investors alleviate poverty by financing affordable car loans
Michelle Corson, a financial professional, wanted to use her skills for the good of society.
“I entered my middle years and decided that I wanted to use the skills and knowledge I had developed to good ends,” she exclaimed. “I wanted to use finance in a positive way and champion the idea of impact investing in Texas to solve some social issues.”
When she looked around she saw that people weren’t able to get better jobs, access good food, or take their kids to the doctor, all of that. because they lacked the means of transport to get them there quickly. Corson has focused on helping American workers get affordable loans to buy newer, fuel-efficient, low-mileage cars. Newer cars are less likely to break down and if they do, they are under warranty.
Transport is crucial to escape poverty, writes Mikayla Bouchard in The New York Times. For the vast majority of Americans, having a car is essential to economic equality. Most of the country does not have reliable public transportation, making fast travel difficult for some American workers.
In 2011, when Corson founded Champion Impact Capital, impact investing was an emerging field. Champion Impact Capital is a consulting firm that helps governments, investors and entrepreneurs find financing strategies that solve social problems. “It took a long time for people in our community [Texas] to embrace the idea that investing doesn’t have to be maximum profit or zero profit, “Corson said.” You can do good and make a profit at the same time.
If Corson wanted to solve the transportation problem of low-income families, she had to build an ecosystem. Founded in 2013, On the Road Lending offers vehicle selection assistance and long-term financial mentoring. It helps people improve their credit. On the Road Sustainability Funds, a sister company, offers affordable loans for the purchase of reliable, fuel-efficient cars. On the Road Lending also helps people find affordable, under-guaranteed, and fuel-efficient cars.
On the Road Sustainability Funds are Community Development Financial Institutions (CDFIs), certified by the United States Department of the Treasury. They provide financial services in low income communities and to people who do not have access to finance. Almost all of the more than 1,200 CDFIs offer loans for affordable housing and small business, and most are not-for-profit organizations. Only a few offer consumer loans. On the Road Sustainability Funds is a for-profit company that provides below-market auto loans for newer, fuel-efficient vehicles for working families. For institutions and individuals keen to have both a social impact and a financial return on their investment, CDFIs are a good investment opportunity.
Over time, On the Road Companies, the umbrella entity, began to expand geographically. On the Road Companies is a family of for-profit, not-for-profit social enterprises. He is now in Texas, Mississippi, Alabama and Georgia. It will expand over the next 30 days to Arizona, Illinois and Indiana. Early next year, he’ll be going to Ohio, Kentucky, and Tennessee.
On the Road Companies has also broadened its strategy to include other vertical integrations. A few years ago, it launched two additional entities: On the Road Garage and On the Road Motors.
On the Road Garage does collision repairs and has a workforce training program. “We are training the workforce of tomorrow by training vulnerable groups so that they have the skills to fix smart car technology,” Corson said. It offers paid apprenticeships that train people in crash repair, advanced driver assistance systems, and other smart car technologies. These are well-paying and sought-after jobs. Skilled workers in bodily technology can earn $ 150,000 per year without a four-year college degree. “We have two facilities in Dallas and we are preparing to issue a bond issue to expand to approximately ten more… We will be doing a $ 109 million sustainability bond that BNY Mellon is issuing.”
On the Road Motors is a Texas car dealership. “We are not a retail franchise like a Toyota dealership,” Corson said. It buys cars for On the Road Lending customers directly at auction or off-lease, providing a cheaper option for working families.
“Our customers have transportation issues,” Corson said. “We don’t ask them to come to our office and meet with us. We do all of our work with people through technology, including the telephone,” Corson said. People can even buy a car from the comfort and safety of their own homes.
“The hardest part about our lending side is that predatory lenders have deeper pockets for advertising than we do,” Corson said. “And they’re all over low income communities.” As mission-based lenders, CDFIs do not have the resources that payday lending, securities lending, or check-cashing companies need to be visible in low-income communities. While community lenders and most banks are familiar with CDFIs, awareness among borrowers and investors is low.
Interestingly, when the media reported that CDFI was helping distribute Payroll Protection Program (PPP) loans to small businesses to alleviate some of the economic shock of Covid-19, the awareness and credibility of this option of funding among consumers increased. Media coverage is an important way for CDFIs to strengthen their brand awareness and credibility as a reliable and affordable funding option.
On the Road Lending also received a grant from the Toyota Finance Service to develop a blockchain platform that will reduce the cost of home loans. “This will allow us to integrate and subscribe applications much more efficiently,” Corson said. “Using the platform will free up money for advertising. “
“We’ve had financial problems over the years,” Corson said. “One of our nonprofits had a really tough year last year during the pandemic.” Transportation was not seen as a basic need, so it was difficult to raise philanthropic funds. The reality is that most customers of On the Road companies are essential workers and front-line workers. They have to drive to get to their jobs.
The ultimate goal is for CDFI revenues to replace the need for grants. “In reality, we probably have three or four years to go before we can reach the volume level necessary to be self-sufficient,” Corson said.
How will you do good while making a profit?