To lead a nonprofit, you cannot be reluctant. You must face your fears, such as the fear of rejection and failure, head on. It’s a shame then that banks are reluctant to give a small business loan to a nonprofit organization.
Many executive directors are reluctant to discuss the need for fast nonprofit funding. Sure, you will readily address your need for more money to help the people and communities you serve. However, when it comes to asking for immediate business cash, you are eerily silent. Therefore, no one talks about why banks are reluctant to give a small business loan to a nonprofit. Most importantly, you need to know what to do about it.
The Reasons a Bank Will Reject Applications for a Small Business Loan to a Nonprofit
Banks require collateral
Some mega nonprofits may have things like large endowments and real estate to pledge as collateral. Small and medium size nonprofits don’t. Those who are seeking a not for profit loan for several millions of dollars then perhaps a bank is the place for you. When anyone else goes to apply for a small business loan, they are out of luck.
Most banks don’t understand nonprofits
Banks want to see strong balance sheets and excellent credit history among your members. In addition, they have strict rules and regulations for granting 501c3 business loans that nonprofits simply can’t meet. Worst of all, their processes are rigid. They are unable to adjust their underwriting and treasury services to suit your unique needs.
Traditional banks are worried about bad PR if nonprofit defaults
People don’t want to see a not for profit organization fail. You start thinking about all those people they cannot help and the good they can no longer do. All because some bank will not give them 501c3 financing. They will come off looking like the mean giant that crushes the dreams of the little nonprofit. No bank wants to be that bank!
Is There an Alternative to a Small Business Loan for Nonprofits?
For a better way to manage your cash flow and help your nonprofit business, turn to an alternative financing company, like Financing Solutions (www.financingsolutionsnow.com). They are eager to offer nonprofit lines of credit and other funding options to help you.
At Financing Solutions, they work with nonprofits all the time. In fact, they are one of the leading providers of fast nonprofit financing.
You can use a line of credit to even out nonprofit cash flow, start programs while waiting for grants to come in or handle emergencies. Every nonprofit should have a line of credit in place, just in case.
To Help Your Nonprofit Don’t Be Reluctant To…
Use a Rolodex to its full advantage. Your biggest supporters may be reluctant to solicit money on your behalf. However, if they are willing to share their list of friends and business associates, that gets you in the door. This makes it easier to request donations.
Learn how to hire the right people. An organization is only as strong as its team. Position your story around your mission and find those with a personal passion that matches it.
Seek nonprofit business funding from Financing Solutions. They will help you take your organization to the next level.
