Non-profits are tax exempt entities organized under the Internal Revenue Code section 501(c)(3) as “public charities”. These organizations are created to provide a “public benefit” and generally help improve the communities which they are a part of. Because non-profits are tax exempt and structured differently from organizations that can be taxed, it can be difficult to evaluate their revenue for a loan. Therefore, many lenders choose not to offer financing to non-profit entities.
Common Types of Non-Profits
You may not realize it but non-profit organizations exist all around you in your community. The house of worship you frequent or the private school you drop your children off at in the morning are likely non-profit entities. The organizers of non-profits do not benefit financially from the net-income of the entity, all profits at the end of the fiscal period are reinvested back into the organization. This does not mean that all employees of a non-profit work for free. Non-profits are allowed to pay their employees salaries and hire independent contractors.
Non-profits usually fund their operations by offering a paid service to the community, through fundraising events, from state contributions or through donations. Often, it can be very difficult for non-profits to obtain enough capital to operate and fulfill their community objective, so they seek financing through third-party lenders.
Our recommended business credit line lender Fundbox, provides unsecured financing for non-profits from $1,000 to $100,000. Non-profits only need an active business bank account to apply and can receive a credit decision in under 3 minutes. Fundbox offers affordable capital for non-profits with rates starting at only 0.4%, and no origination or junk fees are charged.
Additionally, our recommended commercial real estate lender South End Capital, provides commercial mortgages for non-profits from $175,000 to $5,000,000. Although South End Capital does not finance houses of worship, many other non-profit organizations are considered. South End Capital can provide mortgages to non-profits secured by a variety of investment residential and commercial real estate. South End Capital’s non-profit interest rates start in the 7% range, and mortgages can be fixed for up to 30 years.
Non-profits that are not able to raise sufficient capital through fundraising activities or traditional means, do have viable options to secure financing. Non-profits can obtain fast and affordable growth capital, or a reasonably priced, long-term fixed mortgage to acquire or refinance real estate.