Nonprofit Emergency Funding, KBLX Nonprofit Weekend Tips
An ongoing series of informational entries
Nonprofit Crisis Funding
Lenora Williams: Posted on Friday, August 12, 2011 1:17 AM
NONPROFIT CRISIS FUNDING
“Nonprofit organizations have a unique revenue structure, asset base and financing needs. Access to flexible capital helps them pursue their mission, leaving them better equipped to provide necessary services and impact the region.” - Bridgeway Capital, Pittsburgh, PA
Types of funding being discussed:
Lines of Credit
What do lenders look for?
· Financial strength
· Strong management and governance
· Strong agency planning and reporting
· How you are going to repay the funds
Who will lend to you?
· Community Based Financial Institutions
· Government agencies
What are these Institutions looking for?
· Prior year audited financial statements
· Current year budget
· Year-to-date financial statements
· Existing debt and borrowing history
· Sources for the loan repayment
· Do you have a strategic planor a business plan
· Written information on your agency; websites, brochures, annual reports,…
· Bio’s for the board and the management team
· List of funders
What do you need to know from the Lenders?
· Do they know your community and your market
· What are their interest rates and loan fees?
· Will they meet your timeframe
LINE OF CREDIT
The old adage is true even in the nonprofit world, you have to have credit before you can ask for credit. When your organization has strong financials, can demonstrate secured funding, and have balance sheets that reflect break even numbers, this is the time to ask your banking institution for the largest line of credit your historical and current financials can support. Even though you will pay an annual fee to maintain the line of credit, its worth it in the long run because of those unanticipated stormy days, when funder dollars are reimbursed slower than expected and consistent annual revenue streams are unexpectedly eliminated.
Many nonprofits have funding gaps due to the timing of expenses, which may not match up with grant payments or scheduled reimbursements. Bridge loans can be used to help sustain vital services.
Any nonprofit 501(c)(3) organization is eligible for a bridge loan, especially nonprofits that serve the community, including health care, community development, housing, charter schools and other educational organizations, social service agencies, and arts organizations. The bridge loan funds are usually not lent to start-ups.
Loan Amounts (usually vary between $5,000-$500,000)
Eligible Uses of Funds (is determined by lender)
Basic Loan Types (usually working capital and facilities loans to nonprofits)
Terms vary (usually 3 months to 5 years)
Interest Rates (usually vary 2.5% - 9½%, based on the type, amount, and term of the loan)
Collateral (Required, but often more flexible than a bank. Loan officers will discuss collateral options with you)
Fees (closing cost fees vary - generally, lines of credit carry a 1% annual fee. There may be out of pocket costs for mortgages and title insurance for real estate loans)
KBLX Weekend Tip! Bridge Loan Funding continued...
Lenora Williams: Posted on Friday, August 10, 2012 11:37 PM
KBLX Weekend Tip! Bridge Loan Funding continued...
Bridge Loan Funding
Emergency Gap funding, Bridge Loans are available for nonprofits in need of short term lending. Bridge Loans are made on a short-term basis in anticipation of guaranteed permanent or long-term funding. They are usually loans made against contract receivables or capital campaign pledges, and they are expected to be repaid as the receivables or pledges are collected. Nonprofit bridge loans usually have low interest.
Line of Credit
It is very important while you are in good standing with your finances with your bank that you implement a Line of Credit. Establish the Line of Credit in healthy financial times and you will be able to weather the bad times with access to the Line of Credit which acts as Bridge Loan funds. Be sure to pay down the line of credit with unrestricted funds (see my Blog on the definition of Unrestricted funds). Renew your Line of Credit annually. Try to establish the largest amount available for the Line of Credit to allow for a good business credit rating. CAUTION - Remember a Line of Credit is not to be used routinely. The purpose is for a “Rainy Day” but as soon as the rain stops and the sun shines, the Line of Credit needs to be restored/repaid. The Line of Credit does 2 things: 1) Creates a strong financial portfolio if used correctly and 2) Gives the nonprofit access to emergency gap funding
KBLX Weekend Tip - Nonprofit Resources for Bridge Loans
Lenora Williams: Posted on Saturday, August 13, 2011 7:51 PM
A SHORT List of a few BRIDGE LOAN Funders:
· CDIF – Community Development financial institution funds http://www.cdfifund.gov/index.asp
· NAF – Nonprofit Assistance Fund http://www.nonprofitsassistancefund.org/index.php?src=
· Bridge Loan Financing for affordable housing (website with page 2 list of bridge loan funders) http://www.sahfnet.org/library/eastwind.pdf (see page 2)
· The Community Foundation of Greater Atlanta http://www.cfgreateratlanta.org/Grants-Support/Nonprofit-Loan-Fund.aspx
· FCNY - http://www.fcny.org/fcny/core/cfl/#cash flow
· Bridge way Capital - http://www.bridgewaycapital.org/pages/nonprofit-loans
· New York City Nonprofit Assistance - http://www.nyc.gov/html/nonprofit/html/initiatives/initiatives.shtml
· Broadway Federal Bank - http://www.broadwayfederalbank.com/nonprofit.htm
· NCG – Northern California Grant makers http://www.ncg.org/s_ncg/sec.asp?CID=11371&DID=25870
· LA Arts Loan Fund - http://www.cciarts.org/laartsloan.htm
· City First Bank of DC - http://www.cityfirstbank.com/products services/business lending/tabid/1508/Default.aspx