Nonprofits need funds to help support their causes, keep doing the good work they do, and for their needs like administrative tasks.
Because they do not have many of the options for-profit businesses have to finance their businesses, nonprofits have to look for alternatives.
Fortunately, there are several options nonprofits can use to get the financing they need. Keep reading to find out what they are.
Fundraising and Donations
Fundraising and donations are by far the biggest source of financing for nonprofits. This is because different countries have provisions for the minimum percentage of financing that a nonprofit requires to raise from the public to keep its nonprofit status.
Donations can come from individual donors as well as other businesses and private foundations. Regardless of the source of funding, nonprofits have to ensure that they comply with all rules and regulations that govern fundraising and donating in their country of residence.
Nonprofits must also think about how to attract donors, something they have to do continuously because if they do not, they risk not having enough money to keep operating. There are various ways to reach and attract donors, and a cost-effective and simple one to use is social media.
Social media is such an important resource because it allows nonprofits to not only reach a wide audience but to also use the available tools to target individual donors. For this, they need to create social media content that will attract and convert donors. There are various tools that nonprofits can use for this, and one of the most versatile ones is Canva.
Canva is an online design tool that can help you create websites, presentations, infographics, and for this discussion, social media content. This ranges from Facebook and Instagram posts to videos for both Instagram and YouTube.
Canva also integrates with various tools like Givebutter so you can create the content inside your existing campaigns. By using Canva for nonprofits in this way, nonprofits get a seamless way to merge campaign management and content creation without leaving their browser tab.
Apart from the integration that allows Canva for nonprofit use, Givebutter also integrates with other tools that make it easier to collect donations from sources like Venmo and PayPal. They also have guides and experts standing by to help you with your fundraising campaigns.
Corporate Sponsorship
Corporate sponsorship is a relationship where a nonprofit receives sponsorship from a corporation and the corporation receives something in return. Corporates can sponsor events such as fundraising events, runs, and sporting events.
By being the brand sponsor for such events, the corporation receives recognition which can translate to increased brand awareness and increased revenue down the road. Corporations can also receive recognition on the nonprofit’s website or social media channels.
When forging these relationships, a nonprofit has to do enough research to ensure it finds the right sponsorships. The first step in doing so is having a shortlist of corporations and businesses that would be interested in sponsoring an event.
Once identified, the nonprofit has to start thinking about what benefits each of the corporations on their shortlist would get from sponsoring an event. This can be any one of the benefits we have touched on above. The next step is reaching out to find out if the business is interested in sponsoring the event. If they are, all other arrangements are made between the two parties to ensure a successful sponsorship.
Loans and Grants
While both are a great way of receiving funding, loans are a bit trickier than grants. This is because lenders often have strict requirements for lending money and many nonprofits do not fulfill all these requirements. An important one is enough cash flow to pay back the loan. Since nonprofits invest everything back into the business, it can be tricky to pay off a loan.
The second reason is that many leaders will require collateral. If your nonprofit is unable to pay the loan, you might lose the collateral and put your nonprofit in trouble.
While it may not seem like it, things are not as bad as you might think. There are financial institutions dedicated to bettering their communities that provide nonprofits with loans. These include venture capitalists, banks, and credit unions.
There are also special Small Business Administration grants available for nonprofits. Many of them apply to nonprofits doing work to benefit the community such as helping underprivileged communities.
The one challenge you might have is finding an SBA grant for your nonprofit. It will require some research. With over 100 organizations receiving over $8 billion in 2020 from these loans and grants, it is clear to see the resources are available and you just have to find them.
Another challenge that applies to both grants and loans is that it can take some time for the funds to be disbursed. This means that if you need money fast, these options are not the best for you.
Nonprofit Loan Funds
In addition to the lenders we have discussed above, some lenders work exclusively with nonprofits. These lenders have funds that they use to provide loans and microloans to nonprofits. Many of these lenders are also nonprofits who are working to better their communities and using other nonprofits to ensure this happens.
Because these loans are geared specifically towards nonprofits, they often have very low-interest rates. It is also possible to uncover zero-interest nonprofit loans with enough research.
Nonprofit Lines of Credit
In business, lines of credit are offered to businesses so they can pay for small expenses or to sort out temporary cash flow issues. In nonprofits, these lines of credit can be crucial in keeping the organization running until its next fundraising.
Similar to how they work in business, these lines of credit have a set limit and are treated like a revolving credit line. This means that borrowing decreases the total you can borrow next time, and paying back increases the amount you can borrow next time.
The line of credit is a predetermined sum of money a nonprofit can dip into whenever it needs to. The money sits with the lender until the nonprofit needs it. Interest rate and applicable fees are charged once the nonprofit withdraw some money from the line of credit.
The main advantage of lines of credit is that they have an affordable interest rate and often attract lower fees than credit cards and other lending options. Another advantage is that they can be unsecured. This is very different from banks which require some collateral or personal guarantee before giving out a loan.
A line of credit is especially beneficial when there is a delay with a check from the government, when a nonprofit does not have other financing options, or when the fundraising date is too far. Because nonprofits have expenses and need to continue their missions even when there is no money coming in, a line of credit can be of huge help. They also help organizations improve their credit score as long as they pay on time.
As you can see, there are other options for financing nonprofits apart from traditional donations and fundraising. Ensure you read the terms and conditions of these financing options to ensure you know exactly what you are getting into.
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