One of the most common questions nonprofit leaders ask when considering a line of credit is: How long does it take to get a nonprofit line of credit?
We decided to look at our own data to find out.
Financing Solutions analyzed the time between when nonprofit clients first applied for a line of credit and when they completed the process, including due diligence, signing the final contract, and obtaining any necessary board approval.
The result: The median nonprofit took 19 days from application to having its line of credit in place.
Some nonprofits completed the process considerably faster. Others took months. But the data illustrates an important point for nonprofit executive directors and CFOs:
A line of credit is something you should put in place before you need it.
Summary
How Long Does It Take to Get a Nonprofit Line of Credit?
Based on our analysis of 158 completed Financing Solutions line-of-credit applications:
- 25% were completed within approximately 9 days.
- 50% were completed within 19 days.
- 75% were completed within approximately 52 days.
- 90% were completed within approximately 124 days.
The median is more useful than the average in this case because a relatively small number of organizations took an unusually long time to complete the process.
Using the same cleaned dataset of 158 usable clients:
- 9 clients were completed within 3 days — about 5.7%.
- Of those, 3 clients took exactly 3 days.
- The other 6 took 1–2 days.
More importantly, the turnaround time doesn’t necessarily represent how long it takes the Financing Solutions to make a decision.
At Financing Solutions, once a client accepts an offer to move forward and provides the requested due-diligence documents, we generally review those documents within 48 hours.
But there are other steps involved.
The final line-of-credit agreement has to be completed and signed. Depending on the organization, the board may also have to approve the line of credit.
Those steps take time.
And that can become a serious problem if a nonprofit waits until it desperately needs money before starting the process.
Why You Shouldn’t Wait Until You Need a Line of Credit
I’ve been providing lines of credit to nonprofits and businesses for about 15 years, and I have seen the same situation happen over and over again.
An executive director or CFO calls us and learns that their organization qualifies for a line of credit. They’re glad to know the financing is available, but they don’t have an immediate cash-flow problem.
So they tell me:
“We’ll come back when we need it.”
The problem is that when they come back, they often really need it.
In fact, this happened again recently. A nonprofit that had previously spoken with us came back because it was about to miss payroll. Payroll was due in two days, and now they wanted the line of credit established within two days.
We move quickly. But a line of credit isn’t something that can always be put together overnight.
Even if we review the organization’s due-diligence documents within 48 hours, the organization still has to provide those documents. Contracts have to be signed. Board approval may be necessary.
That’s why I tell nonprofit leaders:
The time to establish a line of credit is when you don’t need one.
A Nonprofit Line of Credit Is Supposed to Be There Before the Emergency
Think about the purpose of a line of credit.
It isn’t supposed to be financing that you begin looking for after you realize you’re going to miss payroll on Friday.
It’s supposed to be a financial safety net that is already available when something unexpected happens.
Nonprofits can experience temporary cash-flow shortages for many reasons, including:
- A government reimbursement arrives later than expected.
- A major grant payment is delayed.
- Donations come in more slowly than projected.
- An unexpected expense occurs.
- Payroll arrives before a large receivable.
- The organization launches a program before the related funding arrives.
- Government funding is delayed because of administrative or political issues.
The organization may be financially healthy and still experience a temporary mismatch between when money comes in and when expenses have to be paid.
That’s exactly the type of situation where a nonprofit line of credit can be useful.
But the line of credit only helps if it has already been established.
Waiting Can Also Make It Harder to Qualify
There’s another reason I encourage nonprofit leaders to establish their line of credit while their organization is financially healthy.
The circumstances that cause you to need financing can sometimes make a lender less comfortable providing it.
Suppose a nonprofit talks with us when everything looks good but decides not to move forward.
Six months later, the organization returns because it is experiencing a serious cash-flow problem.
Perhaps revenue has declined. Maybe the nonprofit lost an important grant. Maybe its cash position has deteriorated.
Now the organization’s financial picture looks different than it did six months earlier.
From an underwriting perspective, that’s important.
There can also be circumstances completely outside the nonprofit’s control.
Economic conditions can deteriorate. Government policies can change. Funding for a particular nonprofit sector can become uncertain. Credit markets can tighten.
During periods of increased risk, lenders may change their underwriting standards or become more cautious about establishing new lines of credit.
In other words, the fact that you qualify for a line of credit today doesn’t necessarily mean you’ll qualify for the same line six months or a year from now.
Why Establish a Line of Credit If You Don’t Need the Money?
This is the question I often get from nonprofit leaders.
If they have plenty of cash today, why establish a line of credit?
In the case of a Financing Solutions nonprofit line of credit, there is no cost to establish the line and no cost to keep it available when it isn’t being used. The organization pays for the line only when it actually draws funds.
That changes the decision considerably.
If the organization qualifies today and can establish a financial safety net without paying to leave it unused, why wait until there’s an emergency?
Once the line is established, it is available when the organization needs it, subject to the terms of the agreement.
Instead of calling a lender because payroll is due in two days, the organization can access its existing line of credit.
That is what the line of credit was designed to accomplish.
Our Data Shows Why Planning Ahead Matters
Our historical data makes the point particularly clear.
The median completed application took 19 days from initial application through due diligence, final documentation, and any required board approval.
Could an organization complete the process faster?
Absolutely.
Some of our clients have.
But a nonprofit shouldn’t build its cash-flow strategy around the assumption that everything will go perfectly and a new line of credit can be established immediately.
The better approach is to have the financing available before it’s needed.
I’ve also seen many organizations that initially decided against establishing their line of credit eventually come back when their circumstances changed.
Unfortunately, when they return, they often need the money much more urgently than they did during the first conversation.
When Is the Best Time to Apply for a Nonprofit Line of Credit?
The best time to apply for a nonprofit line of credit is generally when the organization is financially healthy and doesn’t have an immediate need to borrow.
That may sound counterintuitive.
But that’s the point.
A financially healthy nonprofit can go through the application, due-diligence, contracting, and board-approval process without the pressure of an approaching payroll or overdue bill.
Then, if a government payment is late, a grant is delayed, or an unexpected expense arises, the organization already has another source of liquidity available.
You don’t have to start calling lenders during the emergency.
Don’t Wait Until Payroll Is Two Days Away
After 15 years of doing this, one of the most frustrating calls I receive is from an organization we spoke with months earlier that decided not to establish its line of credit.
At the time, everything was fine.
Now there’s a problem, and they need the money immediately.
That’s exactly backward.
The purpose of a line of credit isn’t to solve an emergency after it happens. It’s to make sure you have another source of cash available before the emergency happens.
Our numbers show that the median nonprofit in our historical data took about 19 days to go from application to having its line of credit established.
So don’t assume you’ll be able to put a line of credit in place overnight when you suddenly need one.
If your nonprofit is financially healthy today, that may be precisely the right time to establish one.
Stephen Halasnik is a Managing Partner of Financing Solutions, a direct lender to nonprofits and small businesses. Over the last 25 years, Stephen has built 7 companies and he passionately believes that every nonprofit and business should have a line of credit to turn to as a cash back up plan. That belief, learned over years of working with banks for his own business needs, drove him to start Financing Solutions so credit lines could be easier to set up and less expensive.
