Nonprofit Business Funding
Several components affect nonprofit companies such as the economy, demographics, technology, communications, and even how our leisure time is spent. In addition, they share copious amounts of characteristics with businesses—both have revenues, personnel, expenses, and facilities. Each of these components can determine the fate and effectiveness of a sustainable organization. Thus those that choose to lead charitable nonprofits and those who decide to invest in their missions need to be aware of what is working and what is not to develop strategic planning and success. So some of the trends that continue to be essential factors are technological advances, marketing, personalization, and networking.
The advancement of content marketing such as social media, blogs, and video, for example, continues to advance across all sectors. Being that nonprofits have a natural advantage since they already have an emphasis on mission and positive results; their tendency to have a sense of purpose calls for a necessary foundation for great storytelling to produce compelling content marketing. Therefore, achieving this, organizations can develop a workflow plan that guides and schedules your content production, delivery, and the many platforms you will use. Additionally, they can analyze and build donor personas and content that resonates with them the best and focus on what, why, and how to approach storytelling. Lastly, they can measure content engagement within different platforms through comments, clicks, sharing, and traffic.
Demonstrating the expense of the organization’s work, video, and mobile content marketing has proven to be the most engaging and compelling experience for nonprofits to convey their mission and tell their story of the organization’s work. In turn, this aids in constructing an emotional connection with their supporters to motivate them to take action. Studies have shown, 90% of users said viewing a video about an organization significantly impacted their decision process. It is also found that fundraising across multiple platforms with compelling video brought success. So what nonprofits can do to capitalize on the favored platform is to implement it in events, email, and websites as well as social marketing campaigns. They can also consider including what the viewer can do to take action with concise, brief language and visuals.
Nonprofits of all scales from global to provincial initiatives, compete to engage with audiences—thus, organizations are forced to come up with unique and personalized content. When nonprofits strengthen their connection to their donors, it requires a profound understanding of their supporters to genuinely see how they prefer to be engaged. Luckily, as technology has progressed, it has made it easier to learn about their donors and customize the content to them. For example, there are software companies that allow for an organization to gather more information such as interest and reasons for giving. Leading to follow-up messages that can be sent out to show your supporters that you care. Therefore, personalization and this approach grant companies the understanding of their advocates giving habits and tracking trends to lead to informed decisions and work ethic.
Although nonprofit marketing for your company is an essential aspect of running a successful organization, networking is just as crucial. With all the current social media platforms: YouTube, Facebook, Twitter, Instagram, Pinterest, LinkedIn, and Snapchat—they can and should be capitalized on to cultivate relationships and build their brands awareness. Just in 2018 alone, it is predicted social network users worldwide will grow to 2.44 billion and has no sign of slowing down, creating an incredible potential connection to your brand. Hence, most organizations within the nonprofit sector agree that social media is most useful for specific online activities. These include: Influencing social change, promoting brand awareness, recruiting volunteers and event attendees, and increasing fundraising. With this rise in online support and interaction this is the perfect opportunity for nonprofits to nurture their online communities.
From here, observed for the future of nonprofits, such as technology, marketing, personalization, and networking, it is also vital to know what is causing setbacks for some. These include the struggle to retain and engage donors, sustainability, and not having enough resources. Some suggestions to combat these potential delays is to make your donors feel included as they will be more likely to give when they know exactly where the money is used. As for sustainability, one element to keep in mind is that just because you have a great mission doesn’t guarantee that you’ll be around for years. Thus, this is where strongly built relationships and the reality of sometimes not having enough resources can come in handy; as with these relationships resources can be pulled to reduce cost and offer even more resources. Conclusively, this discussion sheds light on how its always beneficial to understand that there is strength in numbers and, a team with like-minded goals can manifest the best possible business within nonprofit 501 (c)(3) companies as investors and owners alike.
Types of Nonprofit Business Loans and Working Capital
Just because your business is non-profit, doesn’t mean it won’t require the need to raise capital or obtain financing to help with your company or organizations working capital needs. But obtaining a loan or line of credit for a nonprofit entity isn’t easy. Below we will take a look at the various commercial financing options available to non-profits companies.
Nonprofit Bank Loans
When it comes to financing for nonprofit businesses and organization, there is no more affordable form of lending than that offered by a bank, credit union or community lender. Banks are able to offers such low rates and long terms to nonprofit businesses because the lenders reduce their cost of lending by providing financing to only the most creditworthy of borrowers. Therefore, if you’re a nonprofit company seeking financing from a conventional bank, you’ll need to show that the company’s financial situation is solid, and have the ability to easily repay the debt.
| Rates | 5-10% |
|---|---|
| Terms | 1-30 years |
| Funding Amounts | $50,000-$5,000,000 |
| Collateral | Required |
| Fees | Medium costs |
Nonprofit Line of Credit
A nonprofit business line of credit is a nice financing tool to have because it provides access to affordable financing whenever the borrower should need it, without having to pay interest on the amount of financing approved, but not used. Lines of credit can be both secured and unsecured. A secured line of credit is generally collateralized using the nonprofit company’s account receivable, commercial real estate or equipment & machinery.
| Rates | 5-15% |
|---|---|
| Terms | 1-3 years |
| Funding Amounts | $10,000-$5,000,000 |
| Collateral | Required |
| Fees | Medium costs |
Nonprofit Equipment Leasing
Sometimes it doesn’t make sense for a nonprofit business (or any business) to outright purchase equipment for their businesses uses if the company feels they may be stuck with outdated equipment in just a few years. Additional reasons to avoid purchasing equipment outright is because it may require obtaining a term loan to buy the machinery. A way to avoid taking a loan or having outdated equipment is to lease the nonprofit business equipment instead. Nonprofit equipment leasing works by having a lender purchase the equipment for the nonprofit, and then leases to the organization for a period of time.
| Rates | 8-20% |
|---|---|
| Terms | 1-10 years |
| Funding Amounts | $10,000-$5,000,000 |
| Collateral | Required |
| Fees | Medium costs |
Asset Based Nonprofit Loans
Asset based lending is a way for nonprofit to obtain much needed financing for company’s unable to get approved for financing through a traditional bank lender, but have assets on the nonprofit company’s balance sheet that they’d like to collateralize to obtain a term loan or line of credit. Common types of collateral for asset based business loans include real estate, AR, equipment, machinery, and inventory.
| Rates | 8-25% |
|---|---|
| Terms | 1-3 years |
| Funding Amounts | $100,000-$5,000,000 |
| Collateral | Required |
| Fees | Medium costs |
Nonprofit Cash Advance
A cash advance is a way for a nonprofit to obtain cash quickly without having to supply lots of paperwork to prove profitability. In fact, a nonprofit cash advance can be obtained with minimal documentation (just an application and bank statements showing activity in the main operating account). To understand a cash advance better, understand that its not a loan at all, but instead a nonprofit cash advance is the sale of the nonprofit’s future business revenue for a discount to a funding company. This allows nonprofits to access needed cash for work that will be performed up to 18 month later.
| Factor rates | 1.10 – 1.50 |
|---|---|
| Terms | 3-24 months |
| Funding Amounts | $5,000-$2,000,000 |
| Collateral | Not required |
| Fees | High costs |
Summary
While being a nonprofit may limit some of the financing options that for-profit companies have access to, that doesn’t mean that your nonprofit business funding options are nonexistent. As you can see there are a number of options available to get a nonprofit business financing, but they require knowing your options, and finding the best possible solution for your organization. If you are a nonprofit seeking business funding, and would like help finding the right loan for your company, please reach-out to one if our loan specialists, and we’ll help you navigate the process.
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