Things have finally changed for nonprofit organizations regarding nonprofit business loans. Business loans used to only be available for for-profit businesses but, over the last few years, some financing companies have really started to “get” nonprofits.
In reality, some of the most popular business financing options have always been perfectly suited for nonprofits. This is true even when “nonprofit” is missing from a lender’s title. A nonprofit has many of the same concerns that a business does in that they have to meet payroll on time and continue providing services to their clients even when cash flow varies throughout the year.
While there are similarities between them, nonprofits and for-profit businesses differ in many ways. If you’re looking for a business loan for your nonprofit, find one that is specifically suited for you.
Why You Should Be Picky
As a nonprofit, you might think you can’t afford to be picky as not many lenders specifically serve nonprofits. Nonprofit organizations do a lot of good for communities and the world at large. We all thank you for your work.
That said, commercial banks are mostly concerned with whether you can repay the load, get a return on their money, and not upset government regulators. All of this affects why it has been so hard for nonprofits to get nonprofit business loans.
Over the years, things have changed. Today, companies outside of commercial banks have stepped in to help nonprofits.
Choose Specific Lenders
You don’t need to search forever to find a lender that is specifically designated a “nonprofit lender”. Labels shouldn’t matter as much as whether or not the terms of a loan offer your nonprofit what it needs.
There are very few lenders and loans specifically designed for nonprofits. Of course, the “nonprofit” label is often a strong indicator of a specific kind of lender that works best with nonprofits. Remember to take advantage of only the best lenders for your needs. Look for those that are certified by the Better Business Bureau and have good ratings by customers in places like Google Reviews.
Examples
Financing Solutions
Financing Solutions, a leading provider of business loans for nonprofits in the form of a 501c3/not-for-profit line of credit and an A+ and 5-star rated BBB company, offers a flagship nonprofit line of credit. This is similar to a business line of credit but it’s specifically tailored to the needs of nonprofits. They are also a direct lender that is the leader when it comes to working with nonprofits in the US which makes it easier to work with them.
The line of credit offered by Financing Solutions is a great option because of its versatility. Since the line doesn’t cost anything until funds are withdrawn, it can be used as a cash backup plan if a need arises. When you withdraw funds, they can be paid back at any time. This line of credit is comparatively inexpensive to the problem it is used to solve. FS is also fast at handling applications and it only takes two minutes to fill one out online.
The requirements for Financing Solution’s line of credit are:
- $400,000 in annual revenue
- An executive director, officer, or board member with a credit score of 650 or higher
- Four months of bank statements
- 990
Their line of credit doesn’t require any collateral or personal guarantees.
Propel Nonprofits
Propel Nonprofits is a financial services organization specializing in financing nonprofit organizations with yearly revenue of over $5 million. They provide several kinds of business loans, too, but their products are tailored to the needs of nonprofits. The only downside is that their services are only available in a few states in the US, specifically Iowa, Minnesota, North Dakota, South Dakota, or Wisconsin.
The company offers working capital loans and loans meant for facility upgrades. Terms vary widely, from a few months up to 15 years. Rates also vary, depending on the condition of your nonprofit. The APRs are relatively low, starting around 6-7% but, depending on your organization’s financials, these rates can go higher.
All things considered, Propel Nonprofits is a great partner for nonprofits.
First Republic Bank
First Republic Bank offers bridge loans, term loans, and lines of credit to nonprofits. They offer them through their business loans program but your nonprofit must be doing at least $10 million in yearly revenue to qualify.
As a bank that also serves nonprofits, First Republic Bank offers support throughout the entire process. If you take a loan from them, they match you with a specialist to walk you through the process and helps you with any other banking needs.
Conclusion
Loans have always been designed to help address growing an organization and lines of credit were created to help with the ups and downs of cash flow.
Nonprofits didn’t used to have a ton of options when looking for business loans but, over the last few years, more financing companies have begun to give nonprofits the same tools that for-profit businesses have.
