In Colorado, Training Providers Put a New Kind of Capital to Work

A new fund in the state is offering interest-free working capital loans to providers to build out wraparound supports and other services.

The headquarters of CrossPurpose, a nonprofit training provider in Denver, sit just north of City Park, an urban oasis surrounded by high-end condos and multi-million dollar homes. A small home or just a lot on the more-affordable north side could still sell for close to $700K—such is the wealth and the housing crunch in this boomtown.

But the locals CrossPurpose serves typically work two or three jobs and still live below the poverty line. And poverty can be a life sentence in this neighborhood and the ones that surround it.

The average child born into low-income families there has a household income of only $24K by age 35. Incarceration rates are also high.

The big idea: Breaking the cycle of poverty takes more than just high-quality training, says Casey Johns, chief development officer at CrossPurpose. It’s a sentiment that is increasingly echoed across workforce training, with both new ventures like the Google Career Certificates Fund and established institutions like City Colleges of Chicago putting much more emphasis on the wraparound supports that make education possible.

But it’s expensive to provide services like mental health counseling and childcare. Doing so can quickly raise the cost of delivering a training program from $5K to $20K per participant, and it typically requires a substantial amount of upfront capital.

In Colorado, a new breed of financing is stepping into the gap. The Colorado Pay It Forward Fund, run by the nonprofit Social Finance with $8M from a collection of philanthropies, is offering zero-interest loans of working capital for training providers like CrossPurpose. 

The fund also is offering interest-free loans for learners to cover living expenses so they can work fewer hours and spend that time on training. 

“Some of the strongest programs were already free to students,” says Joe Bateman, director of impact investments at Social Finance. “But even a free program still had access barriers if it was a full-time commitment and people couldn’t leave even a minimum wage job.”

Putting Capital and People to Work

The details: Social Finance has been a pioneer in offering outcomes-based loans, which provide interest-free loans to students to cover tuition and sometimes living expenses. Learners only have to pay back the loans if they complete their program and hit a certain income threshold.

Such loans are most commonly used for short-term training programs—offered by colleges or alternative providers—that aren’t eligible for federal financial aid. In New Jersey, for example, the state set up a fund to offer outcomes-based loans to learners in certificate and other non-degree programs in high-demand fields. As in Colorado, the program is called a “Pay it Forward Fund,” a reference to the fact that graduates’ loan payments are recycled back into the fund and used to support the next round of learners.

The goal with such funds is to expand access to training. In Colorado, the original plan was to only offer outcomes-based loans to learners, but the philanthropies changed course when they realized that some of the highest-quality providers were already tuition free.

“They were flexible enough to make sure that the capital was being well-used to build the workforce ecosystem,” says Bateman.

Three training providers were selected for the first round of funding. CareerDash will offer standard outcomes-based loans to students, while ActivateWork, which provides tuition-free tech training, will offer standalone loans for living expenses. And CrossPurpose is only tapping the loan fund for working capital.

On the ground: CrossPurpose served just shy of 400 learners last year in fields like commercial truck driving, medical services, and IT. 

  • About 77% of graduates of its core job training programs had jobs six months later, with an average jump in wages from about $540 a month to $3,280, according to the group’s annual report.

In addition to training, CrossPurpose provides a wide range of support. Learners are paid a stipend to cover lost work hours, and they participate in intensive mentoring and relationship-building activities, with the goal of giving them broad personal and professional networks they can call on. The organization also provides extensive career and mental health counseling. 

“We found early on that training doesn’t matter if the hole in their heart isn’t addressed,” Johns says.  

Program costs totalled about $6.2M last year. The working capital loans will cover the cost of two additional mental health counselors, who will enable CrossPurpose to operate a licensed clinic and be eligible for Medicaid and insurance reimbursements. Those payments will, in turn, be used to repay the loans and to provide ongoing revenue to support the organization’s services.

Likewise, the career counselors will help CrossPurpose build out a new fee-for-placement model with employers. Those kinds of revenue streams, Johns says, will help put the organization on a more predictable financial footing.

“It’s really hard in the world of fundraising,” Johns says. “There’s a lot of fear in the market. And I don’t want to be in the place every year where we’re waiting until the end of the year to see how much we’re going to have.”

The interest-free loans, she says, are helping the organization ramp up self-supporting services much more quickly. “We still would have done it,” she says, “but we were able to do it much faster.”

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