Finance & Strategy

Real world nonprofit finance matters, and real world thinking about strategies for financial, programmatic, and leadership sustainability. This column is written by Steve Zimmerman, principal of Spectrum Nonprofit Services.

photo of Steve Zimmerman

How to Work With Your Banker Amidst Change

With more than 25 years of banking experience and an equal tenure serving the Portland, Ore., community with Catholic Charities, Impact NW and other organizations, Kathy shares this advice for how to help your banker to give your organization as much credit as possible.

In the past, nonprofits tended to be asset rich with limited need for credit. Times have changed, however, now that constrained governmental funding, and lower charitable contributions are continuing for the foreseeable future. No banker wants to be the bad guy or to say no to an organization that is doing good work in the community, but a nonprofit borrower that starts to struggle can fall quickly from an acceptable risk to an unacceptable risk, threatening the viability of the organization and the essential services they are providing to the community.

This article seeks to provide several ideas for how a nonprofit can address the impact of these trends in order to help a bank to assist this transitional period through providing credit lines or term loans. The suggestions and the bank's perspective on financial performance can be grouped under the two distinct concepts: conservative financial management and institutional agility.

In These Turbulent Times for Nonprofits

2017 has already brought many new challenges for the service sector, and we can expect more to come. So, there is no time to waste in getting ready for whatever changes your nonprofit may face.

As leaders, we are continually using internal and external resources as successfully as we can to solve new problems and rebound from adversity strengthened, and yes, even more resourceful. In this article I suggest ideas to help weather the storm and benefit from the disruptions.

How do federal funding threats affect you?

It's time for our next Blue Avocado Poll. Does your organization rely on federal funding? Are you discussing the possible budget cuts at the federal level? What are your contingency plans? Please take a minute to tell us what you are seeing, and we'll share what we learn in the next issue. (Responses are all anonymous.)

Beyond the multiple-choice questions, we also invite you to tell us your stories about the potential effect of funding cuts for your organization. Sharing your contact information is totally optional, but if you do, we'll follow up to find out more and plan content for Blue Avocado that can help.

Begin the survey here!

A Milestone in Nonprofit Lending

Hello Avocados! We wanted to share this exciting milestone from the Nonprofits Insurance Alliance of California, founding and ongoing sponsor of Blue Avocado.

In January 2017, the Nonprofits Insurance Alliance of California (NIAC) reached $2 million in lending through its pilot loan program. The Loan Fund offers short-term credit to small and mid-sized nonprofit members of NIAC.

When NIAC first developed the fund we wanted to create an efficient solution to the cash flow needs so common in nonprofits. We received survey responses from 300 nonprofit organizations and found that getting access to cash flow loans through a quick and efficient process that demonstrated understanding of nonprofit financials was darn near impossible. Many nonprofits showed a need for short term loans while waiting for confirmed grants and contracts to be funded. Thirty years ago NIAC took up the challenge of proving that nonprofits were not poor insurance risks and we decided it was time to try to show that nonprofits were also good credit risks. So, we developed a pilot program in 2014 with $1 million of loan capital. Another $500,000 in loan capital was added the next year to meet demand. The NIAC Member Loan Fund provides 12-month loans up to $50,000 at a fixed six percent interest rate.

Nonprofit Mergers Are Like Falling In Love

A question was recently submitted to American Nonprofits about the organizational and legal issues of merging two nonprofits, by someone right in the middle of such a merger. We asked Ron Kratofil to share tips and resources for that situation.

The continuing pressure to do more with less and the growing challenge of maximizing our community impact have created a challenging environment for nonprofit organizations. So where do concepts like merger and acquisition fit into our evolving discussions? Having had the opportunity to be involved in both a full blown merger and an acquisition, I can relay to you the lessons I have learned.

Is Your Nonprofit Ready for a Capital Project?

I have an almost-two-year old who just discovered Mega Blocks and how to stack them as tall as possible before they fall. That usually leads to some two-way negotiation about where the next block should go, to avoid a cascade of blocks and tears. (Sometimes the game is to build it high and knock it down, but that's a Blue Avocado article for another day!)

Here's where I tell you that nonprofit construction projects are something like negotiating with a toddler still practicing his stacking.

Fortunately, a real expert is here to move us from an awkward metaphor to some practical tips because a capital project -- maybe you've outgrown your space or had a piece of land gifted to you from a donor -- can be an incredible opportunity. But only if you are prepared. Kate Stephenson is a partner at HELM Construction Solutions in Montpelier, Vermont, and former nonprofit executive director herself. Here are her field-tested tips for your next capital undertaking:

Financial Prospects for Nonprofits: How Does Your Nonprofit Rate?

Blue Avocado bubbles with insight because you, our readers and our writers, are astonishingly smart. We've heard great ideas from you along with suggestions for how we can be even more relevant with what we publish here on the site, so this issue we're doing something new.

Starting with this issue of Blue Avocado we're including a poll. Please take a minute to let us know what's happening where you are, and you'll see the aggregate results in the next issue, along with content that takes your responses head-on. (Responses are all anonymous.)

Take the Poll!

Everything We've Been Taught About Major Gifts is Wrong

Of course, by "everything" for purposes of this article I mean "three big things." But conventional wisdom can lead us astray when devising effective fundraising strategies. Like leprechauns, these mythical truisms can mislead us into thinking we should be chasing pots of gold that will always remain out of reach:

Myth #1: People have been acculturated to resist asking people for donations. Training them in "doing the ask" and inspiring them about goals are good ways to overcome this resistance.

Actually, only a few people are very resistant to asking strangers . . .

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