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Can a Nonprofit Get SBA Loans From The Government

The Small Business Association (SBA) traditionally has an important role in providing access and opportunity for small businesses. A nonprofit is a small business, so it begs the question: Can a nonprofit get a nonprofit loan from the SBA (Small Business Administration) other than the PPP (Payroll Protection Program) or Disaster ReliefSBA Nonprofit Loan Program?

Although an SBA loan is an excellent financing option for many small businesses, business loans for non profit organizations are unfortunately not available to nonprofits.

Don’t fret, there are other options such as Financing Solution’s Nonprofit Line of Credit Program, non-SBA backed loans from local and commercial banks, and even private loans from existing donors.

Approximately half of the American workforce works for small businesses, including nonprofits. As the backbone of our nation, these organizations need help and support, often through an SBA loan.  Most people believe that the government provides business loans but the reality is that the SBA program works through authorized banks and there are still some stringent requirements to be approved. Non-profit organizations have especially unique requirements when it comes to working capital, cash flow, and monthly obligations.

Financing Solutions Nonprofit Line of Credit Program

During the 2008 great recession, it became obvious to small businesses and nonprofits that the commercial banking system wasn’t designed to work with businesses that had yearly revenue under $10 million. Sure, the SBA loan program was set up to help small businesses but in reality, the SBA loan program still had certain restrictions.

What started to replace commercial banks were lenders that catered to specific industries. One such company was Financing Solutions which carved out a niche in providing Nonprofits with a Line of Credit. Financing Solutions is now the leading provider of lines of credit to smaller nonprofits throughout the United States.

A nonprofit line of credit is a predetermined amount of money that a nonprofit has access to if needed. It is an inexpensive cash back up plan to help nonprofits when cash flow is down. In many cases, the line of credit is mostly used by nonprofits for important expenses that must be paid on time such as for payroll, rent, etc. Often, cash flow at a nonprofit is only down temporarily due to a delayed reimbursement or a slow down at certain times of the year.

Financing Solutions specifically designed its line of credit program with nonprofits in mind.

  • Excellent reputation. A+ Rated by the BBB with 5 stars rated reviews
  • No collateral or personal guarantees required
  • No cost to set up the line and no cost when the line is not being used
  • Easy to get in place credit line with a no-obligation 2-minute online application
  • Online customer web portal to request funds, track payments, schedule payoff
  • Credit Line can be paid off in days, weeks, or months. Whenever you like.
  • When used, the credit line is inexpensive
  • No obligation to use line of credit
  • The line stays in place for 12 months and is renewed easily
  • Simple documents are required to setup credit line like 990 and bank statements

Do Commercial or Local Banks Provide Nonprofits Loans?

Most banks like Well Fargo, Bank of America and others are willing to work with nonprofits however there are certain restrictions that make it hard for a nonprofit to qualify. All nonprofits require collateral and personal guarantees. Collateral is an asset that a bank could sell to recover losses in case of default. Personal guarantees are required by a commercial bank and would be enforced if the nonprofit defaults. The person signing for the bank loan for the nonprofit would be putting their personal collateral on the line if the nonprofit defaults.

Is a Bank The Cheapest Option For a Loan or Line of Credit?

A commercial bank loan or line of credit could be the cheapest option depending on how much your nonprofit uses the credit line or the size of the term loan. If you use the line a lot then a bank could be the cheapest option. Each year a bank will charge a setup fee and a yearly maintenance fee that is in the thousands of dollars. A bank might also require audited financials from a CPA and those audited financials can be expensive.

Lastly, a bank loan for a nonprofit will take some time to get and keep in place. Count on it taking 2-3 months to get the application filled out and the backup documentation together. Plus some more time for the bank to review everything.

Is a Private Loan From a Donor an Option?

A private loan from a donor or board member can be an option but there are some considerations.

The IRS does have certain restrictions about who can loan money to a nonprofit. Some of those restrictions revolve around:

  • Is the donor being under/over-compensated for the loan
  • Is someone in the nonprofit benefiting personally from the loan
  • Has your nonprofit board been consulted and approved the loan

Lastly, getting a private loan from a donor is a good one-off but many executive directors do feel uncomfortable with going back to that same donor numerous times.

What is an SBA Loan?

SBA loans are highly sought-after loans for small businesses. They are so competitive because of their very favorable loan terms and repayment terms. This includes lower interest rates, longer pay back-terms, and the bank is guaranteed by the government some reimbursement if the loan defaults. They are reserved for highly qualified borrowers, and thus very difficult to obtain. Because of their favorable terms, they are highly flexible and businesses can use them for a variety of purposes.

The loan application process is highly competitive, and it is very difficult to get approved for this loan. This might seem like the ideal type of loan for nonprofits, but unfortunately, as you will read below, it is unfortunately not an option. We will present you with alternatives to this type of loan later in the article.

Why Can’t Your Nonprofit Get SBA Loans?

So, does the SBA provide 501c3 business loans? The simple answer is no. SBA loans are not for nonprofits. But don’t be discouraged, there are now other options.

SBA loans for nonprofits do fall under their SBA Microloan program. This microloan program provides SBA loans to nonprofit intermediaries and these companies then offer loans to nonprofits. The rest of the monies in the program go to for-profit businesses.

In other words, these companies get SBA loans and then dole out the money to other companies. Even if your business does fall into this category, you should be aware that there are numerous terms and restrictions. For example, the term for these loans is about six years. It’s also a secured loan, which means it requires you to pledge collateral which is often very hard for nonprofits to come up with.

All eligibility requirements and creditworthiness decisions are made by the intermediary, not the SBA. In addition, there are various fees from the lender that you will have to pay.

So while it is an option for nonprofits to secure loans from the intermediary program, it can often be extremely difficult to secure even these loans. Furthermore, intermediary loans have less than favorable terms and loan amounts, and the application process is competitive. This whole ordeal might leave you looking for another option altogether.

Is There an Alternative When You Can’t Get an SBA Loan for a Nonprofit?

Financing Solutions is the leading provider of lines of credit for nonprofits. The criteria is simple and the line of credit is very easy to get. Your Nonprofit must have at least $200,000 in yearly revenue to qualify. In addition, someone on the board, or an officer, must have a 650 or greater credit score. There are no personal guarantees and no collateral is required.

The nonprofit line of credit costs nothing to set up and nothing if not being used making it an excellent backup plan. There are no restrictions as to what the line can be used for. Many nonprofits use their line of credit for when reimbursements are delayed and payroll is due. As a nonprofit, you likely have a variety of cash flow and working capital needs, of which a line of credit is an excellent financing option.

Unlike in the case with a long term loan, there are no penalties for early repayment. You can pay back the money as soon as your government grants or donations come in. This represents your best option for short term nonprofit financing.

Best of all, it’s easy to get your line of credit quote. You just need to fill out the 2-minute online application and we will send a no-obligation offer for you to consider. Your Relationship Manager from Financing Solutions will go over the quote with you. If you decide you want to move forward then we will need 4 months of bank statements, your most recent 990, and a few other simple documents.

Financing Solutions, an A+ BBB and 5 stars rated company, is a direct lender and has had hundreds of nonprofits as clients.


As you can see, securing an SBA loan is simply not realistic as a nonprofit, but there are options out there to meet your unique financing needs. An important first step is to really identify your business’s unique financial needs. You should know your current needs as well as your projected needs, so that you can find a financing option that really works for you. Financing Solutions can work with you to meet these needs and provide an option that works best for your business.

Get the right source for 501c3 financing – look no further than Financing Solutions. They will give you the fast nonprofit funding you need to go from good to great.


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