Be Prepared – Prove your Nonprofit is Loan-Worthy
Is your nonprofit in need of a few extra bucks this year? Whether it’s monthly or seasonal cash flow shortages, operational needs, unplanned expenses or that ongoing roof leak, financial resources – or lack thereof – remain the ongoing challenge consistently facing nonprofits.
Unless you’re sure a generous, wealthy donor will always be there to support the life and growth of your church, synagogue, mosque, or community nonprofit, traditional financing may prove your best option.
Astute board members recognize a bank loan might be the best tool to help your nonprofit grow and succeed, and savvy funders understand the complexity of managing a nonprofit. They know loans can be valuable tools for cash flow and financial stability.
Before you apply for a loan at your local bank, get thoroughly prepared:
- Determine what type of loan you need:
- One-time loan to finance a specific project, such as purchasing more equipment or making renovations;
- Line of credit to provide flexibility for short term cash flow;
- Commercial mortgage to renovate or expand your facilities.
- Offer a well-thought-out and documented business plan, including:
- Balance sheet;
- Projections of receivables;
- List of management and board members;
- Your most recently-filed 990.
- Provide evidence of collateral detailing:
- Real estate holdings;
- Bank account balances;
- Business equipment and inventory;
- Grants receivable;
- List of annual donations;
- Plans for capital campaign.
- Prove why your nonprofit meets the six C’s of credit:
- Character. Provide payment history reflecting consistently-met financial obligations;
- Capacity. Illustrate your ability to repay the loan;
- Capital. Assess monthly funds left after subtracting your monthly debts;
- Conditions. Outline history of your nonprofit, benefactors, and consistent contributors;
- Collateral. (Refer to above, provide evidence of collateral detailing);
- Cash flow. Provide financial statement reflecting ample funds to meet loan requirements.
Being prepared for the borrowing process can save headaches, prevent surprises, and put you in a better position to receive a positive response from your lender.
And we’re here to help. Contact us for loan-preparation accounting or tax assistance for your nonprofit: Lynn@OnlineStewardship.com or call (904) 398-4747.
