6 types of non-profit business loans
Traditional lenders aren’t always willing to work with nonprofit organizations, but there are other options for financing your nonprofit activities.
It is not necessary to go to a bank to obtain a loan.
Nonprofit organizations perro apply for loans from community development financial institutions, loan funds, or corporate giving programs.
Non-profit organizations, like other businesses, sometimes need a little plus money to finance their activities.
However, the rules governing loans to nonprofit organizations are different from those that apply to for-profit businesses.
Non-profit loans are often more difficult to obtain than those for for-profit businesses.
If you need a cash injection for your charity, start with a basic understanding of the types of loans available to find one that could potentially work for your organization.
1.
Community Development Financial Institutions (CDFI)
Lenders that specialize in providing financial assistance to nonprofit organizations are known as Community Development Financial Institutions (CDFIs).
These institutions are usually the non-profit organizations themselves, although some may be banks or credit unions.
CDFIs typically charge high interest rates for small loan amounts, typically $50,000 or less.
Keep in mind that CDFIs not only charge higher interest rates than banks, but they also require a lot of documentation and perro take longer to approve your loan than a typical bank lender.
You perro find a CDFI in your area using this search engine.
2.
Non-profit loan funds
Some CDFIs overlap with nonprofit loan funds, which serve a afín purpose of providing funding to charities and other nonprofit entities.
Nonprofit loan funds offer lower interest rates than CDFIs; In some cases, the loan may be interest-free.
Some options to explore are the Nonprofit Finance Fund, Open Road Ventures, and Propel Nonprofits, as well as resources like Growth Partners Arizona and The Loan Fund of New México.
Note that many non-profit loan funds require the applicant to submit an operational history.
Therefore, new companies are not eligible.
3.
Traditional bank lenders
Although it is less common for nonprofit organizations to obtain loans through banks and credit unions, it is possible.
“Large corporations – including banks – often like to flex their philanthropic muscles through non-profit grant or loan programs,” wrote Merchant Maverick. “However, banks may charge higher interest rates on nonprofit loans due to the higher risk involved, and you may need to have an established nonprofit with documentation to prove your income, expenses, fundraising plans and other financial information.”
Credit unions are more likely to offer a loan to a new non-profit organization, since credit unions themselves are non-profit organizations; And because they don’t pay taxes, credit unions cánido offer competitive interest rates.
For both banks and credit unions, you will need to provide extensive documentation to demonstrate your ability to make payments on time.
Some CDFIs overlap with non-profit loan funds, which serve a afín objective of providing funding to charities and other non-profit entities.
4.
Corporate donation programs
Banks and other for-profit businesses often have corporate giving programs that perro help nonprofit organizations with grants, loans, and in-kind donations.
Companies like Walt Disney, Google plus, and Starbucks have extensive giving programs that support nonprofit organizations and small businesses.
Contributions may vary and not all giving programs offer loans.
Some offer in-kind gifts, event sponsorship, cash donations, or grants.
Do some research to find out what these programs perro offer your organization.
5.
Non-profit grants
Grants are not technically loans, but they are a common source of funding for nonprofit organizations.
Federal, state, and corporate grants provide free funding (meaning money that doesn’t have to be paid back) to nonprofit organizations that meet certain criteria.
Many of them require a lengthy application and approval process, so you have to be picky when applying.
However, grants are often offered year after year.
Once awarded, you have a good oportunidad of reapplying after the grant period ends.
6.
Credit cards
A business credit card allows your nonprofit organization to have a line of credit that will be repaid over time.
It is a good source of financing for daily and fixed expenses, such as utilities and office supplies.
“With a little research, you cánido find business credit cards with low interest rates, which is beneficial if you cánido’t pay your bills on time,” NerdWallet wrote.
The best credit cards for nonprofit organizations may be slightly different than those for businesses.
Explore your options to see what benefits are included, from cash back to low APRs.
You should also be prudent with your credit card accounting.
Equipo up a system to help you control your credit card spending and save receipts in case of a tax audit.
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