The Chronicle of Philanthropy and the Nonprofit Finance Fund have teamed up for a series of live web chats, the first of which was today. You can view a schedule of the chats here. Today’s chat focused on financing options for nonprofit organizations, here is the link to the transcript of the chat.
One highlight of the chat was a question of when a nonprofit should consider getting a loan:
Question: When should nonprofits start looking at loans?
Answer: The answer to this one is a little counterintuitive: npos (or any borrower) should look for credit–and a banking relationship–in good times, when they don’t have a pressing need for cash. Establishing a good relationship with a lender in good times will help the lender understand the nature of the organization, have faith in management, and be there–with some cavaets–when times get tougher. However, “emergency” and “loan” very seldom belong in the same sentence, because loans require trust, reliable revenue and predictability to be sound.
This was a great all-around Q&A exchange. It reinforces what has been said before that nonprofits need to take action now to make sure they can make it through this financial crisis
Question: What are some of the biggest mistakes nonprofit groups can make when they’re facing a tough financial discussion in this economic climate?
Answer: One mistake we see is denial or strong, silent behavior, where organizations (or individuals) become frozen because there’s a highly unfamiliar level of uncertainty about revenue, and in some situations, an increased level of demand for services. This is a time to be communicating with board, funders, bankers and employees about possible alternate scenarios going forward
Another mistake is avoiding the financial facts–a lack of data tends to make an already emotional situation even more personalized. Data is a way to understand the boundaries of the problem, and focus everyone on meaningful solutions.
Finally, we see a tendency of boards to get involved in minute details of cost cutting–often to the detriment of program–when they need to focus on revenue as well. The shared responsibility of board and staff at a nonprofit is to make sure the organization serves the public–and now that’s more important than ever.
Nonprofit Loan Resources
This is by no means a comprehensive list and I encourage readers to add more in the comments. Beyond the resources listed in the above chat here are some others off the top of my head:
Community Development Financial Institutions Fund
Information on Program Related Investments (PRI’s)
The Northern California Community Loan Fund
Some groups may serve limited geographic regions or specific sectors of the nonprofit world. You could do a Google search for others. Again, let me know if I missed any resources.
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