Many nonprofit organizations might think that it would be logical to get a loan from a board member or a family member instead of going to a bank. Maybe your 501c3 has a board member that also works for a bank and you think it would be simple to get a loan there. However, there are IRS rules relating to nonprofits and both of these activities will incur major penalties for your nonprofit organization and the board or family member.
These scenarios are considered self dealing by the IRS. Additionally, they view the family or board member as a disqualified person. The penalties for the disqualified person include a 10 percent excise tax. There could also be a 200 percent tax penalty for the deal. This is no way to treat a board or family member.
Along with these penalties, the foundation manager can be hit with a 5 percent excise tax penalty as well. It is definitely not worth all the penalties, so it might be better to just go with an outside source. Perhaps Financing Solutions (www.financingsolutionsnow.com) is the answer for you.
Banks Are Not the Answer
When you want to get a nonprofit business loan, your first thought is usually to go to the bank. The problem is banks rarely work with nonprofit organizations. There are only a few out there that actually do. As a result, it can be very hard and time consuming to find one that gives loans to nonprofits.
One of the reasons that banks steer clear of nonprofit organizations is to avoid a possible tax penalty related to working with nonprofits. For example, if anyone at the bank is affiliated with the nonprofit, the bank could be in danger with the IRS. Instead of worrying about this issue, banks find it much easier to just keep away from nonprofits.
Even if you find a bank that is willing to work with you, it is still very hard to get approved for a nonprofit organization loan. They expect the foundation manager to have an incredibly high credit score and make no exceptions. It also takes way too long to try to get approved.
There are many times that a nonprofit organization will need money for next week. Unfortunately, with a bank you would be lucky to get a loan within a few months. In addition, banks prefer to work with the companies that have been around for years and years. This makes it even more difficult for an organization in the first couple years of business to be approved. This begs the question, is there a better way? The answer to that is yes.
Financing Solutions Can Help
When a nonprofit organization is in need of financial assistance, they should always work with a company A+ rated by the Better Business Bureau. One of those companies is Financing Solutions. It is the company to choose if you need cash now because they work with nonprofits all the time.
Other companies offering nonprofit financing don’t have the same experience and know-how to work with 501c3s because, at Financing Solutions, nonprofits are their number one customers. They also offer a fast process and friendly business style.
There is only a 15 minute phone interview to begin the application process and you can be approved within 24 hours. Additionally, there is minimal paperwork so your part will be easy. Financing Solutions is simply the best answer.