A line of credit is a great way to finance any institution’s expenses when you know cash is coming in. Lines of credit are also among the most underutilized business tools for nonprofits.
Despite how useful a good non-profit line of credit can be, many organizations have trouble securing one. There are several reasons for this, most of which surround banks’ unwillingness to deal with non-profits in a serious way.
Most commercial and local banks simply won’t qualify non-profits for a line of credit. This is because they usually require personal guarantees or collateral that most non-profits can’t provide.
The financing situation faced by non-profits has led many of them to look elsewhere for the funding they need. This leads many executive directors at non-profits to turn to wealthy donors or board members when cash flow issues arise.
Relying On Wealthy Donors Isn’t Sustainable
Of course, relying on wealthy donors and board members isn’t a viable long-term solution. While any funding is good for non-profits that are struggling, making the wrong choices can have dire consequences.
Relying on the goodwill donations of wealthy, concerned individuals can cause several problems. First of all, there’s the simple, human problem of relying too much on the goodwill of a few people. If you’re an executive director at a non-profit, you run the risk of isolating important pillars of the non-profit and the wider community by relying on them too much. The thing is that even at a non-profit, this kind of reliance paints a poor picture of the organization. It shows that your organization has some deep problems that’ll eventually cause people to question the overall state of your non-profit.
The IRS Might Come After You
Beyond the social problems caused by relying on loans from board members and donors, there are also several daunting legal challenges. You might not notice it in the short term, but the longer you rely on these people for funding, the higher your chances of getting in trouble with the Internal Revenue Service (IRS).
The IRS has strict rules when it comes to accepting loans from board members and donors. And you probably know very well that when it comes to the IRS, contact with them is best kept at a minimum.
It’s quite difficult for an executive director at a non-profit to balance the organization’s need for reliable cash flow with IRS compliance.
Why Good Financing Is Critical
Despite these challenges, executive directors work hard and take risks to keep their non-profits running. It may seem like a poor decision to risk so much to keep a non-profit running, but what’s the alternative?
For many non-profits, the answer to these challenges is emergency savings, tight budgeting, and continuing with whatever’s worked so far. But when the financial foundations of any institution are so unstable, the cat will have to come out of the box at some point.
So, what happens to a non-profit that doesn’t have enough money to fund its payroll and other expenses? Unfortunately, there’s no good news here either, as failing to pay employees and cover your overhead can be even worse than dealing with the IRS.
The number one reason for a business to use a line of credit is to make payroll when funding is delayed. There are many other reasons to use emergency funding, including unexpected events and expenses. The thing is that like any business or other institution, nonprofits face serious problems if they fail to pay employees on time.
Failing to pay employees on time is actually illegal. If a non-profit is struggling financially, the first goal is to come up with enough money for payroll. Failing to make payments on time can lead to penalties and audits, which can be a death blow to a non-profit that’s already struggling financially.
How Can A Struggling Non-Profit Face These Challenges?
The solution to these problems is a better financing option. A line of credit that is both accessible and reasonable. Unfortunately, the perfect option is hard to find.
One great solution to these challenges is Financing Solutions. Financing Solutions is a leader in providing lines of credit to non-profits. The idea behind their product is simple: a financing option that’s tailored to the specific needs of non-profit organizations.
Running a non-profit isn’t the same as running a business with a seven-figure revenue, so why should you have to face the same challenges as those businesses? In reality, you don’t.
Financing Solutions has been the leader in non-profit lines of credit for five years. When you look at what they offer, it’s no surprise why.
Lines of credit from Financing Solutions are easy and free to get in place. They also cost nothing when they’re not being used. Many of their clients get their lines of credit set up during either a sudden emergency or a sudden new opportunity. Their online application usually takes about two minutes to fill out. There are no credit checks and they’ll get back to you with a written offer sent to your email immediately. From here, you’ll talk to your assigned account manager, who’ll go over your offer with you in detail. Because they’ve been dealing with non-profits for years, Financing Solutions understands the concerns that nonprofits have when it comes to their financing needs. They’ll only give actionable, straightforward, and detailed answers to your questions.
A non-profit line of credit from Financing Solutions doesn’t require collateral or a personal guarantee. The only requirement you need to deal with is a board resolution stating that they’re aware that the line of credit is being taken. The resolution must be signed by a majority of board members. That’s all they need from you.
Once you have your line of credit, you can draw funds whenever you need them. You can do so at any time from the Financing Solutions secure customer portal. The portal also serves as a simple and useful interface for you to view your available funds, draw limit, payments, and other important information. They’re also available if you need help and can be reached by phone or email. Their lines of credit are renewed annually at no additional cost, which has led to happy customers sticking with them for years.
Why Fair Financing Matters
Running a non-profit is a hard job. Executive directors deserve better options than the ones made available to elite businesses. You shouldn’t feel the need to draw money from a line of credit, which is why a good solution should allow you to have a backup financing option as a backup for when you need it.
Financing Solutions, a leading provider of business loans for nonprofits in the form of a 501c3/not-for-profit line of credit, offers a great non-profit line of credit for these exact reasons. Nonprofits are a greatly underserved group. This is why Financing Solutions has put together a great passive financing option for you. They’re available online whenever you need them. They have 5 stars on Google Reviews and an A+ rating from the Better Business Bureau, so they aren’t hard to find more information on.
