I Own a Nonprofit — What Business Loan Options are out There for me?


When we talk about bank loans, most often we are referring to home or business loans.

But non-profit organizations occasionally need extra funding as well. Whether it’s to balance the books, expand operations, or pay off debt, loans for non-profit organizations are commonplace. 

Most non-profit organizations generate operating expenses from fundraising or grant applications, but occasionally they may need an institutional source of funding, like a bank. 

However, just because a non-profit organization is doing good in the world doesn’t mean a bank will provide a loan on less than ideal terms. Just like a small business, a non-profit will be evaluated on its ability to repay the loan. 


Demanding Criteria

In general, when a non-profit approaches a bank for a business loan, the bank will evaluate the organization using the following criteria:

Creditworthiness: Does the organization pay its suppliers and debt on time? 

Capital: How much money has the nonprofit invested in services so far? And will it use this loan to invest in a particular project? 

Cash flow: Is the organization capable of covering its expenses in addition to the loan payment? 

Collateral: Do the nonprofit have assets like real estate, cash, or investments to secure the loan? 


So What Are my Options?

Let’s assume that you can fulfill the above requirements. The next question is, what are the different institutional choices for securing a nonprofit small business loan

         1. Nonprofit loan funds

These are lenders that specialize in loans for nonprofits. Most often, these entities are nonprofit organizations themselves. The upside to working with these organizations is the low interest rates they offer. The downside is that they specialize in making smaller loans for non profit organizations

To get started, two suggestions are the Nonprofit Finance Fund and Propel Nonprofits


          2. SBA Loans and Grants 

The US Small Business Administration is a government-funded agency that provides loans to individual entrepreneurs and small businesses. It also makes certain loans available to nonprofit organizations. 

For instance, the CARE Act empowered the SBA to grant loans to nonprofit organizations affected by the Covid-19 pandemic. The SBA also issues grants to nonprofits that help underprivileged people or communities through their Program for Investment in Micro-Entrepreneurs (PRIME). 


          3. Banks and Credit  Unions 

As we previously mentioned, nonprofits can get a business loan but they will have to meet strict criteria. But if the organization is well funded and has a history of paying creditors on time, it is possible.

A first place to start is the organization’s bank. Credit unions, which were established to serve a specific community or group, is another option. 

To apply for a nonprofit business loan you’ll need extensive documentation, including financial statements, tax returns, and annual reports. 


         4. Business Credit Card

A business credit card is an easy way to pay ongoing expenses. It’s not exactly a loan, but works like one by supplying a line of credit. 

Of course, the disadvantage of using a credit card is the high interest rate you’ll pay if the monthly  balance is not paid in full. Those extra dollars add up quickly, so don’t be seduced into a credit card spending binge. 

One option is to find a 0% introductory rate card. These are often offered for a six- to 12- month period and will save you from transferring a debt load from one month to the next. A pro tip is to transfer balances from one zero percent card to the next, ensuring that you will never pay interest on accumulated balances. 


The Right Time to Take a Loan

The best time to take a loan is when your organization has a specific need. For instance, building a new wing of a building to provide services or taking on new employees to serve a specific population. Next, be sure that your organization has a reasonable plan for repayment and has the support of stakeholders in the organization. 

There is also a wrong time to take out a loan for a nonprofit. If an organization consistently operates at a deficit and will use the loan to finance further debt, a loan will only perpetuate the debt cycle. Adding more debt to existing debt may threaten the financial foundations of the organization. Rather than take a loan, maybe it’s time to take a broad look at the organization’s mission and capabilities. 


We're working on some pretty cool new pieces of content, including tools that will give you insight into your business finances.

Want to be the first to know when they launch?

Why is Credit Utilization Important for Small Businesses?

Why Is Credit Utilization Important for Small Businesses? Credit utilization, or the total credit amount you are using, is an essential component of how your credit report is scored. It is also one of the few factors you can change fairly rapidly. Certain negative marks can stay on your credit profile for up to seven […]

Is the Revenued Business Card Right for My Company?

Whether it’s a loan, a business credit card, a line of credit, or alternative financing, it’s vital to ensure the funding option you select aligns with your business’s goals and remedies its financial pain points. Your company may be struggling, but that doesn’t mean it should have to pay exorbitant interest rates or finance charges. […]

How to Read Financial Statements

A financial statement demonstrates how a business has utilized the funds it has received from stockholders and lenders. In this way, these statements speak volumes about the executive strategy and offer a sense of transparency for those who have infused their own funds into the business' mission.

How Does the Revenued Business Card Work?

The Revenued Business Card can be used to make purchases just like any money card. The difference is there are no credit obligations, no interest, and no damage to your credit report. The Revenued Business Card is unique because its funding model is adjustable enough to underwrite businesses in any industry with limited revenue, operating […]