Income Advance Programs: Building More Than Just a Bank Account (2024)

When Jeremy, a Technicians for Sustainability worker, came to speak to us at work about a medical bill, he had been with our company for just under four months, biking the four miles to work each day, rain or shine, at 5:30 a.m. The 10-hour days in the Arizona sun installing solar panels were all-consuming, but he felt energized by the mission. In fact, he said he’d never been happier in a job.

He was making a living wage and had benefits for the first time in years. Slowly, he was stabilizing his finances. This stability allowed him to make a much-needed trip to the doctor’s office, where he learned that the intense pain he had woken up to was a deep jaw bone infection, the result of long-deferred dental work. Jeremy was at risk of serious health problems if he didn’t get the needed dental treatment and associated medical care immediately, but the cost was a real barrier. Jeremy had no idea where he’d come up with the hundreds of dollars needed for his medical care. He’s not alone; according to a recent Federal Reserve finding, four in 10 Americans wouldn’t be able to come up with $400 to cover an unexpected emergency.

When Jeremy came to me in HR at Technicians for Sustainability to inquire about options for his emergency situation, our company had been exploring the idea of Employer-Sponsored Small-Dollar Loans (ESSDL) for months. An ESSDL is a small loan (initially capped at $500) through a local bank or credit union, with a short repayment term done through automatic payroll deduction handled by the employer. We started learning about ESSDLs when we heard what fellow Certified B Corporation Rhino Foods had created through its Income Advance program, and continued as we participated in the Income Advance Learning Experience and courses made possible through B Lab.

Because we had a pre-existing relationship with Tucson Old Pueblo Credit Union, a local banking institution designed to serve its members, we recognized a natural affinity and approached them about starting an ESSDL program. But it wasn’t that easy. The concept was new to our partners at the credit union, and they were understandably cautious about proceeding. So we started with laying out what we were looking to build: simple access to small, emergency loans at a fair rate, while building workers’ credit and encouraging continued savings after the loan is paid off, thereby creating more agency of their financial life.

You see, Jeremy didn’t have a bank account. Nor did he qualify for one. He, like too many Americans, had few options to choose from and usually resorted to the neighborhood check cashing shop, an industry with typically high fees and often predatory lending practices.

Next, we demonstrated the benefits of an ESSDL for the credit union. Because ESSDLs are small loans paid back through payroll deductions, they aren’t a risky loan for the credit union. Also, risk is further reduced by employer participation in the loan screening process, in which employers verify that employees are in good standing with the company. And this new relationship with a credit union is a benefit to both the credit union itself and the employee, as the employee must be a member of the credit union in order to receive the loan.

For people like Jeremy, who previously didn’t qualify for accounts with financial institutions but who qualify for an employee-sponsored loan, the credit union is willing to extend membership and loans to ESSDL participants. So Jeremy was able to open an account with a reputable financial institution, and the credit union was able to build its member base and the potential for sale of more products and services to that new member. Not insignificant, the program is also recognized as a valuable community service by the credit union.

Finally, we made connections, putting the credit union in touch with NorthCountry Federal Credit Union and Filene Research Institute, which both have championed ESSDL-type programs. Through the information sharing that ensued, our credit union partners were now equipped with the understanding they needed to build out the program. They worked steadily behind the scenes, updating us as the program moved through compliance stages.

As it turned out, Jeremy’s crisis was the nudge we all needed. The credit union agreed to process his loan as a test case, and it took less than 24 hours from application to funding. He proceeded with the medical care he needed and had a manageable repayment plan. In addition, he now has a checking and savings account with a friendly banking institution and is building his credit. More broadly, we’re now offering the ESSDL to all employees of our company and the credit union is exploring a rollout of the ESSDL program with other employers, which would magnify the impact to hundreds and perhaps thousands in our community.

I’m reminded of B Lab’s theory of systems change; is it possible that some of our most important ripples of change are those that begin within, reverberate with positive results, and then ripple out beyond our business? Through continued innovation and best practice sharing within the B Corp community, we are using our businesses to create a more just, equitable and democratic economy, one ripple at a time.