It was a strange place for a meeting about interest rates.
On a cold night at the Summerfield Waldorf School in Santa Rosa, while a crowd mingled in the school auditorium munching on locally made hors d'ouevres under the warm lights of a Christmas tree, a group of borrowers and investors hashed out specifics on the details of their loans.
The event was held by RSF Social Finance, a San Francisco-based nonprofit that provides loans and investment opportunities to socially-conscious enterprises. It was part of RSF's attempt to make finance more transparent, by bringing borrowers and lenders together in one room.
"Our stated mission is to transform the way the world works with money, and the way we look at it is one relationship at a time," said Don Shaffer, president and CEO of RSF.
"The way I describe our financial system today is as complex, opaque and anonymous, based on short-term outcomes," Shaffer said. "And what we try to do at RSF is to model financial transactions that are direct, transparent and personal, based on long-term relationships."
To accomplish that goal, RSF creates an unusual opportunity for the borrowers — companies like Sebastopol beverage maker Guayaki — to meet with investors. In the gatherings, known as "pricing meetings," the borrowers explain how they've been spending their money and how a change to their interest rate would impact their bottom line. Investors have a chance to meet the entities they're helping to develop, and they also get a chance to chime in on what a change to the interest rate would do for their financial outlook.
"The pricing meetings are so powerful," said Susanne Karch, owner of Estate Services, based in San Rafael, who has invested about $17,000 in RSF. "After those meetings, I always go home and write another check."
Founded in 1984, RSF oversees about $160 million in assets. Its 1,500 investors support about 85 borrowers, Shaffer said.
Those funds have helped Sonoma County-based companies like Guayaki and Indigenous Designs to expand and thrive. Other Sonoma County borrowers include Tomales Bay Foods, the parent company of Cowgirl Creamery, and the Sri Sarveshwari Samooh Sonoma Ashram.
RSF also helped Ceres Community Project, which delivers healthy meals to families dealing with serious illness, to buy a larger building, expanding its meal deliveries from 28,500 in 2011 to more than 60,000 in 2013, said Cathryn Couch, executive director of Ceres.
The companies and nonprofits funded by RSF have a shared mission of being socially conscious enterprises committed to the "triple-bottom line" — people, planet and profit.
"We really like the idea of participating in an organization that has shared values, and knowing the money we're paying in interest is going toward other organizations that share our values, rather than a bank," Couch said.
The current return to investors is more in line with a CD or money market account than, for example, a mutual fund. Investors earn 0.5 percent, paid on a quarterly basis. Borrowers pay the RSF Prime rate of 4.5 percent, or more depending on the level of risk.
RSF takes the 4 percent to run its operation, administering the loans and finding new borrowers and lenders. It weighed in at a recent meeting about how it spends its money and what a change to the interest rate would mean for the organization.
That percentage hasn't changed since 1991, but Shaffer thinks it may be time to consider increasing RSF's take, to enable the nonprofit organization to do more work. It now has a staff of 38 employees and an operating budget of about $6 million a year.
"We need to have our voice in this discussion too, as the third participant in the dialogues ... because we feel like it's warranted for our spread to be a little bit bigger than it may be, like 4.25 percent," Shaffer said.
The level of transparency is attractive to investors who want to know where their deposits are going, and how they're being used.
"I took IRA money and directed it to RSF," said C?ine Haugen, an investor from Rohnert Park. "Instead of the company taking my money and me not knowing what they do with it, this way I know what they do with my money.
RSF doesn't loan to just anyone. Companies or nonprofit organizations that want to borrow must answer an extensive questionnaire about how the company treats its employees and the environment, the same application entities fill out to become a "Benefit Corporation," a class of corporation that is required to create material benefits for society and consider non-financial interests when making decisions.
To qualify for an RSF loan, companies or nonprofits must have three years of operating history, ideally with the same management team, revenues of about $1 million a year or more, and profitability or a plan to be profitable.