Who is Lending to Nonprofit Organizations
When running a nonprofit business, you lend a helping hand to those in need. However, when you need help, who is lending to nonprofit organizations?
Since nonprofits do so much good, lenders should jump at the chance to help them continue their mission. In fact, the opposite is true. When it comes to finding out who is lending to non-profit organizations, you only have a few options.
In This Article
In this article, we will examine why it can be so difficult for businesses in the nonprofit sector to receive financing with a traditional loan. We will examine the factors that make these loans to nonprofits rarer than you might expect, and also offer some suggestions if you are looking for alternative methods of financing for you nonprofit.
The most important thing you can do in the volatile world of nonprofit financing is to evaluate your needs effectively. You should know the type of financing that your business needs, as well as future projections to continue to meet these obligations as they arise. Once you have outlined your needs, you can read this article and try to match your needs with our suggestions for nonprofit financing options.
Why Banks Are Not Lending to Nonprofit Organizations
The banking industry today is not like it used to be. In the past, you simply went to your neighborhood bank, talked to a loan officer familiar with your organization and applied for a not for profit loan. Things have changed.
Banks don’t always measure the creditworthiness of a nonprofit properly when making decisions. For example, since typically only unrestricted funds can be considered as part of collateral, most nonprofit business owners cannot meet a bank’s strict criteria, so they are denied.
Also, banks don’t take a nonprofit’s mission into consideration. They must frequently answer to shareholders first, so numbers are all that matter. This makes it much easier for for-profit corporations to receive bank loans than nonprofits.
What to Do If You Can’t Get a Loan?
For the reasons listed above, it can be quite difficult to secure a traditional bank loan as a nonprofit organization. However, this doesn’t make your cash flow issues or working capital requirements any less real. You need to find a reliable source of revenue to meet your obligations even when cash flow is down. So in the next section, we will present some options which can solve this common predicament faced by nonprofits.
Alternatives Sources for Lending to Nonprofit Organizations
Some nonprofits choose to borrow money from board members. However, this can be risky for both your organization and executives. It can lead to resentments and accusations, especially if they are not repaid in a timely fashion. Additionally, this can bring up some conflict of interest concerns which are definitely not wanted in this business environment.
For a better option, turn to a cash advance company, like Financing Solutions (www.financingsolutionsnow.com). Numerous nonprofits come to them again and again when faced with a temporary cash shortage.
With help from Financing Solutions, you can make payroll on time, manage daily operations and start programs. This type of not for profit financing is ideal when waiting for a government grants, donations, or other capital to come in.
You can get a business cash advance or nonprofit line of credit. Best of all, it is short term nonprofit funding, so you can repay it in a few weeks or months and then get back to business as usual.
Advantages of a Line of Credit
There are quite a few scenarios that make a line of credit especially helpful for a nonprofit. By nature of the industry, nonprofits can have problems with cash flow due to inconsistent donation patterns, which lead to large revenue injections at once. This can result in periods where it is especially hard to generate the funding sources necessary to meet short-term obligations.
A line of credit can be a reliable safety net for meeting these short-term obligations and keeping your debts and payments in order. It is illegal to not pay your employees on time, so keeping on top of payroll is a top priority. Financial Solutions will work with you to build a line of credit that meets your company’s needs specifically.
What You Need to Know About Nonprofit Lending
With so many rules and stipulations, it’s easy for nonprofits to get something wrong. Fraud can occur quickly if you don’t keep a close eye on employees and volunteers. These tips may serve as a warning to check your own systems and stay on the right side of things.
The first thing you need is a plan to repay any nonprofit loan. Many organizations get themselves in trouble by continuously getting another loan to pay off the prior ones. In addition to discussions about credit reports and what the money will be used for, you must also decide what kind of payments you can reasonably afford. This will help you choose the right lender.
It is also vital to have all the paperwork you will need. In addition to the usual documents, like cash flow statements and balance sheets, a nonprofit will also be required to provide things like bylaws and a resolution of the board of directors.
You should also know that you can get quick nonprofit funding from Financing Solutions. They will provide the right financing at the right time to get you on the right track for success.
If your nonprofit would like a line of credit that you can use when cash flow is down please visit www.fscreditline.com/np to learn more, to apply and to receive a written offer. A Line of Credit for your nonprofit costs zero to set up and zero until you use it, making it an excellent backup plan.
Top Tip to Increase Donations as a Nonprofit
This article has touched a lot on why a line of credit is so effective for meeting obligations when cash flow is low. In this section, we are going to provide some tips to increase cash flow by increasing donations.
Our number one tip for increasing donations is to stay engaged and communicate with your target customers. When people donate money to you, they are making an investment in something they believe in. They want to know that their money is being used to advance your cause. So it is your job to communicate with them and show them that that’s exactly what is happening!
Show them where their money is going, and keep an open communication about all your initiatives and future projects as well. This way, they will be happy with the way they spent their money, and more likely to donate again in the future.
This strategy gives your donors a real sense of ownership over your projects. They can directly see how their money helped advance a cause they care about, and will be more motivated to get involved again in the future. Try out this strategy and see how it helps your donations grow!
We hope this article has opened your eyes to the various lending options available to a nonprofit. We hope you will take this information and apply it to your own business to decide which is the best option for you. Take some time and evaluate your current and future financing needs, and pick an option that best works for your business.