Early in his career, James Wahls was interested in learning about how capital flowed into communities—especially communities of color. This interest sprung out of his own experience navigating being a Black social entrepreneur in Detroit. To combat the bias he saw within the philanthropic industry, Wahls intentionally sought to use his work experiences to better understand how to uplift communities of color.

While working as a fellow on the W.K. Kellogg Foundation’s impact investment team, Wahls created investment structures to help entrepreneurs of color. This work led him down a path toward using philanthropic tools and other mechanisms to attempt to drive capital to small business nonprofits, particularly those led by communities of color.

Now the founder and managing director of the Baltimore-based Revolve Fund, he attempts to use his resources to help organizations led by people of color access capital.

Using Recoverable Grants to Advance Racial Equity 

Launched in 2021, Revolve Fund describes itself as a philanthropic initiative that “provides patient, interest-free capital to increase capital access for Black/African-American, Latinx, Native American, and other people of color (POC)-led businesses, nonprofit organizations, financial intermediaries, and venture funds.”

The initiative uses a funding strategy known as recoverable grants. Recoverable grants are grants that are meant to be repaid, in part or in whole, to the funders once a grantee reaches predetermined milestones. If these milestones are never reached, the recoverable grant transforms into a regular grant and does not need to be paid back.

Wahls—and other proponents of recoverable grants—contend that recoverable grants help advance racial equity because when the money is returned, it is recycled to further fund other organizations.

Revolve has a stated goal of “funding with an equity lens.” In an interview with NPQ, Wahls noted that he believes recoverable grants benefit people of color and marginalized groups in three different ways:

    1. They get capital to entrepreneurs of color that might be harder for them to attain otherwise
    2. They offer flexibility. Wahls says that because the recoverable grant model is not reliant on repayment from the grantee, it allows for the development of flexible terms: “We can take the time to understand the revenue models to ensure that our capital is not extractive.”
    3. Recoverable grants also allow funders to work more directly with the organizations and take a holistic approach to helping them meet their goals

Read the full article about recoverable grants by Rebekah Barber at Nonprofit Quarterly .