Where to Get a Line of Credit for A Nonprofit
In the world of nonprofits, there are timelines, fine lines, and bottom lines. These help to keep you on track and focused on your mission. Perhaps the most important line is a line of credit for your nonprofit.
There are many bumps and challenges along the line of success and it’s easy to get sidetracked. Doubts about cash flow, delaying programs and waiting for government grants can all wreak havoc on the best-laid plans. A line of credit (LOC) for your nonprofit is one of the most valuable tools you can have but first, you need to know where to get it.
In This Article
This article will cover everything you need to know about line of credits for non-profit organizations. It will cover why a line of credit is important, how to go about getting one, and why it might not be as hard to get as you might think. Then, we will briefly go over a few other financial options for nonprofit organizations.
What is a Nonprofit Line of Credit
A Nonprofit line of credit is a cash backup plan that you can use for emergencies or opportunities. Commercial business have been using this tool for decades however commercial/local banks have been relucant to approve nonprofits for this type of financing because banks are require to have collaterial and personal gureentees, which nonprofits structurally have a problem with.
Fortunately, there are companies like Financing Solutions that have designed a nonprofit line of credit specifically to address all concerns.
Why It’s Important to Get a Line of Credit for Your Nonprofit
A nonprofit often gets reimbursed in large payments or gets reimbursed after services have been performed. However, you have recurring fixed bills like payroll, rent and other expenses that need to be paid. A nonprofit line of credit allows your non profit to bridge that gap and give you the capital you need to meet short-term obligations.
A nonprofit business loan from Financing Solutions is better then a bank or financial institution. Traditional banks expect you to have exceptional credit and tons of collateral. This makes lines of credits superior to traditional lending options for a variety of reasons.
Business bank loans from a commercial bank also tend to take a long time to get approved. This often results in all of your hard work resulting in a not-approved response, as banks are typically hesitant to give loans to nonprofits. You might have to wait months for an answer on your application and months before you receive any money. Plus a line of credit from a bank often costs money just to setup. This sometimes makes it impossible to address the emergency at hand such as making payroll and handling important expenses that are due.
The reason why most nonprofits need a line of credit is so they can make payroll when a check has been delayed. However, what most nonprofit organizations don’t know is that it is actually illegal to not pay your employees on time. So if you have ever considered not paying your employees on payday, think again. It could result in hefty fines, or worse, closing down your nonprofit.
Overall Line of Profit Advantages
Unlike a commercial bank, Financing Solutions line of credit costs nothing to setup and nothing until used making it a great cash backup plan. With the ability to draw on the line of credit when you need the cash, it provides a much more reliable source of money. Relying on your credit card, board member donation or on a traditional loan is simply not a great alternative to a line of credit.
Where is the Best Place to go for a Line of Credit for Your Nonprofit?
At Financing Solutions (www.financingsolutionsnow.com), they work with nonprofits all the time. In fact, Financing Solutions is one of the leading providers of nonprofit financing in the US.
When you turn to Financing Solutions, you can get a line of credit in place in less than 48 hours. It stays in place for 12 months and is renewed yearly. It requires very little paperwork and, unlike a commercial bank, requires no collateral or personal guarentees.
The Line of Credit costs nothing to set up and nothing when not being used, making it an excellent backup plan. When the line of credit is used, it is inexpensive and can be paid back at any time. It is a very flexible source of financing and you only have to use it when you need it.
The process starts by filling out a simple online application that only asks 10 questions. There is no credit check done until after you decide to sign the offer letter to move forward. You will receive a written quote to consider and a Resleationship Manager will call to answer any questions you have. If you decide to move forward, we will ask for a 990, last 4 months of bank statements, and a few other very simple easy to get documents. The overall sign-up process is easy and intuitive, and you can get your line of credit in a very short period of time.
To qualify, you must have at least $400,000 in yearly revenue.
Why the Line Between Nonprofit and For-Profit Businesses Is Not as Big as You Think
Today, it’s becoming increasingly difficult to tell the for-profit entities apart from their nonprofit 501c3 counterparts. For-profit businesses adopt corporate social responsibility policies to ensure they give back to the community. More and more not for profit organizations have gotten their start as for-profit business ventures. Some examples include Toms Shoes and King Arthur Flour.
Also, more than 30 states have legislation which requires companies to pursue social gains in addition to profits. There are now thousands of companies classified as low profit limited liability firms, allowing them to be for-profit but still mission-based and able to collect philanthropic funding.
In what is now called the impact investment market, donors are looking for community development, social initiatives, and environmental outcomes as well as a monetary return on investment. For strictly nonprofit corporations, this often spells more competition for donations and attention.
What this means is that companies of all types have recognized the benefits of social initiatives and corporate responsibility that isn’t directly tied to profit. A strict non-profit is no longer competing in its own space exclusively, but with for-profit businesses as well. While they still must be aware of developments within the non-profit community, the market forces from all sides have made this a much harder industry to receive donations, which can restrict cash flow even more than it already was.
You can better compete in this new marketplace with not for profit funding from Financing Solutions by having a line of credit to be used when cash flow is down. They will help ensure that your organization is on the path to 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. This makes it an excellent backup plan.
Other Uses for a Line of Credit
This article has already explained the general benefits of a line of credit for your non-profit. However, there are many more benefits as well. In this industry, you will quickly realize how big of a problem limited cash flow can be, and with donations that are sometimes very spaced out, it can provide you with great peace of mind knowing that you have a “safety net” to repay certain expenses and short-term obligations.
Here are some other situations where a line-of-credit is invaluable for a non-profit:
As a Safety Net: Let’s face it, you never quite know exactly when you’ll need cash in a business environment, and non-profits are no different. Whether one of your vehicles breaks down, there’s a flood, or anything else, it can help to have a line of credit available before you need it, so that the inevitable surprise expenses don’t truly catch you off-guard.
Working Capital Requirements: Of course, there are many short-term capital requirements in any business – from payroll, to utility bills, and more. A line of credit provides a more sustainable way to meet these short term requirements.
One-Time Opportunities: We know that opportunities don’t always last long in business. If you run into a one-time offer, or a unique opportunity, and you don’t have the capital at the time, you could miss out. Line of credits ensure you will always have a way of meeting these opportunities should they come up.
We hope this article has provided you with the relevant considerations of why a line of credit could be a great alternative for your non-profit business. Non-profits are under a variety of unique circumstances that might create difficulties in meeting short-term obligations. A line of credit can option to meet these obligations, and give you the peace of mind you need.