Although many non-profit organizations operate similarly to for-profit businesses, finding and qualifying for funding can be more difficult for non-profits. In some cases, lenders may see a lack of steady income as a risk, which can make it challenging to get a typical business loan. It can also be difficult for some non-profits to meet the requirements for government grants or private donor funding.
Despite these challenges, there are several sources of funding available to non-profit organizations. Here are some options to consider:
Grants
Since grant money does not have to be paid back, grants often have less stringent qualification criteria than business loans. Many non-profit organizations rely solely on grants and donations for funding. Grants are offered through a variety of sources including government agencies, foundations, and even corporations. There are many online tools and resources to help you find grants that might be a good fit for your non-profit.
When considering grants as a source of funding, it’s important to keep in mind that grant applications and proposals can take a significant amount of time to complete. The application process can vary by grant, making it time consuming to apply for several different grants at once. Grants are also highly competitive. If your non-profit plans to apply for many grants, you may consider hiring a dedicated grant writer. This will allow your organization to focus on funding while still ensuring the necessary time for other critical business operations.
Non-Profit Lending Programs
There are lending programs out there specifically for non-profit organizations. They often have a lower interest rate than traditional business loans, and in some cases they may even be interest free. However, like a business loan, non-profit loans typically require you to provide your business financials during the application process.
Many non-profit loans are geared towards bettering communities, and as such, you may be required to demonstrate how your organization helps the local area. The Nonprofit Finance Fund and Propel Nonprofits are two organizations that offer financing specifically to non-profit organizations.
Corporate Giving Programs
Many corporations provide donations to local charities and non-profits. Some have dedicated programs set up to offer large amounts of funding, while other corporations may conduct sporadic internal fundraisers for specific causes.
Even if a corporation does not have a designated giving program in place, it could be worthwhile to reach out to them to request a donation. You may be surprised with the response you get. Many for-profit companies are proud to display their commitment and dedication to the local community.
Business Credit Cards
Although a business credit card might not be your first consideration, it could potentially provide the temporary financing your non-profit needs. You can compare business credit card offerings and apply for low interest cards or introductory 0% APR offers.
A business credit card can be a good option when your non-profit will likely not qualify for a business loan, but needs some sort of short-term financing. Of course, whatever amount of credit you use will need to be paid off, so always keep the card’s interest rate in mind.
Business Loans
While there are many types of funding available for non-profits, it’s important to remember that nothing is stopping you from applying for a traditional business loan. While it can be challenging for some non-profits to meet the eligibility requirements of a business loan, it’s a viable source of funding for many organizations. A bank or credit union will handle your application for a loan or business line of credit in the same way they do for other businesses. They’ll require specific documents and financial statements, which may include your business credit score and business plan. Your lender will likely take the following financial details of your non-profit into account as well:
- Annual revenues (fundraising, donations, membership fee, etc.)
- Fundraising plans
- Operating expenses
Some financial institutions offer loans specifically for non-profits. Such lenders will likely have a good understand of the unique challenges and needs of organizations like yours.
While the financial circumstances of a non-profit can make it challenging to secure funding, there are still plenty of options available. Through grants, community programs, corporate giving, and traditional loans, you can find the funding sources that best suit your organization.
If you are a non-profit looking for banking and financing solutions in Massachusetts or Rhode Island, BankFive may be able to help. Schedule a consultation with a member of our dedicated Business Banking Team to talk through your options, or learn more about our business loans and local Charitable Giving Program.