Loans and CDFIs and PRIs - Oh My!
This week the Chronicle of Philanthropy and Nonprofit Finance Fund launched their discussion series, Financial Management in Tough Times.
The first topic was Financing Options, which included information about loans, PRIs, and other financing options. Coincidentally, at the same time we were hosting a Social Enterprise Network on capital sources and touched on many of the same topics.
This week’s post gathers definitions and resources shared by participants of both discussions. For more details, I suggest you read the transcript at the Chronicle of Philanthropy’s website or Not-For Profit Accounting’s summary.
Program Related Investments (PRIs)
A PRI is a tool foundations can use to provide capital to nonprofit organizations. It is more like a loan than a grant because it must be repaid or otherwise provide a return for the foundation. In their PRI Primer, the PRI Makers Network lays out the benefits of these investments:
PRIs give charitable organizations or commercial ventures access to needed capital, typically at favorable terms. In return, the funder benefits in several ways:
- It is often able to recycle PRI payments for subsequent charitable investments.
- The foundation is generally able to count PRIs toward its minimum five percent payout of net assets.
- PRIs allow foundations of every type and size to have greater programmatic impact.
Resources
- The Hidden Gems of Foundation Funds from Balancing the Mission Checkbook
Community Development Financial Institutions (CDFIs)
Community Development Financial Institutions are vehicles to foster economic growth and ensure access to capital in urban and rural low-income communities. Many CDFI’s focus on affordable housing and economic development activities. Others, like Nonprofits Assistance Fund and Nonprofit Finance Fund, specialize in providing credit and financial training to nonprofit organizations that serve low-income and underserved populations.
- To find a nearby CDFI, use the Member Locator on Opportunity Finance Network’s website
Loans and Lines of Credit
Clara Miller issues an important reminder that “loans are never a substitute for revenue” and makes an excellent case for when credit makes sense for your organization. For more information you can also read our Borrowing Guide.
Download our Cash Flow Template to help assess whether or not credit can help your organization bridge a gap caused by grant timing, delays in government reimbursements, or other accounts receivable.
Nonprofit Harvest
- Nonprofits Buying Into Franchises from The Nonprofit Times