Banking on Nonprofits February 2008
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Welcome to Banking on Nonprofits, a newsletter from Nonprofits Assistance Fund to provide the finance industry with useful news and information on nonprofit financial management. |
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Nonprofits and Commercial Real Estate There are a variety of reasons for nonprofit organizations to own a building. Hopefully, the primary driver is based in mission and program quality, with financial consideration a close second. In a study of the finances of nonprofits in Minnesota, Nonprofits Assistance Fund found that about 40% of these organizations own their building, and many others would like to become an owner. Social service, health care, and education nonprofits are more likely to own than arts or advocacy organizations. The financial analysis of a buy versus lease decision is essentially the same as one a business would conduct; however, nonprofits have one advantage that businesses do not - the ability to pay for all or part of the building with donated dollars through a capital campaign. Donated funds may provide the equity portion needed to finance a long-term mortgage, or may pay the full cost of the building over a three to five year capital campaign period. There are many opportunities for banks to provide financing and support to nonprofit customers during a capital project. Most nonprofit executive directors will be involved with one or two capital projects during their career - and the expertise and guidance of a banker with commercial real estate experience will be invaluable. Nonprofits Assistance Fund can help both the nonprofit and the bank review and finance capital projects with flexible, subordinate mortgage and bridge loans.
There are a lot of great resources for your nonprofit customers who are interested in buying or renovating a building. A good place to start is with these great Real Estate Planning Guides from IFF, a nonprofit real estate lender based in Illinois. Other financial resources are available on our website. |
Winter 2008
This issue of Banking
on Nonprofits:
Nonprofits Assistance Fund is a nonprofit community development financial institution that helps nonprofits realize their own organizational visions. Our strategically essential and timely financial support facilitates sustainability, transformation, and success. Through our transformational lending program, we provide financing for working capital, cash flow, equipment and facilities projects with a focus on strengthening the operation and mission of nonprofits. Our lenders also provide strategic financial guidance and promote healthy financial practices in the nonprofit sector. Nonprofits Assistance Fund is dedicated to fostering community development and vitality by building financially healthy nonprofit organizations, we can help you assess the risk and understand the finances of nonprofit businesses.
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Helping Nonprofits Thrive: Juxtaposition Arts Juxtaposition Arts in North Minneapolis began in 1995 as a free, eight-week studio arts workshop for urban youth. However, Juxtaposition Arts' leadership had a vision of making a broader impact on the community and knew they needed to plant roots. As Executive Director DeAnna Cummings commented, "Without a permanent space, we didn't have a sense of stability. We wanted to secure a place in the north side of the community, which would allow us to further our vision of impacting the community at-large." There was great momentum and work began to transform a small, commercial space off West Broadway into a studio, gallery, and office. However, the building project and capital campaign had different timelines. The contractors needed to be paid right away, while the capital campaign stretched out over a four-year calendar. Without adequate cash flow, renovation stalled. DeAnna recognized that they needed some help quickly to accomplish their goal, and contacted Nonprofits Assistance Fund. With some capital commitments in hand, Nonprofits Assistance Fund was able to structure a flexible $400,000 loan that allowed Juxtaposition to restart and complete the construction. At Nonprofits Assistance Fund, it's more than a loan; Executive Director Kate Barr established a relationship with DeAnna that focused on managing the construction project, problem-solving, and building financial health for the future of the nonprofit. Kate recalls, "They clearly had the smarts and willingness, so we helped Juxtaposition become more disciplined with their financial management by working hand-in-hand with them to build infrastructure." Juxtaposition opened their gallery and office space at West Broadway and Emerson Avenue North in February 2004. The organization continued their capital campaign to pay off their debt and work towards a bigger vision - partnering with other arts nonprofits to create an urban youth arts and culture center at their site that would be multidisciplinary with music, visual arts and dance.This inspiring story can be found, along with many others, on the Nonprofits Assistance Fund website. |
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Record Year for Nonprofit Lending Nonprofits Assistance Fund had a record year in 2007 for lending to nonprofits. With our $11 million capital base, we approved 92 loans totaling $8.5 million. Outstanding loans at the end of December 2007 totaled $9.3 million. As usual, the diversity of the amounts and types of loans, as well as the nonprofits served, was broad. The smallest loan in 2007 was a $20,000 cash flow bridge loan to a social service agency, and the largest was a $450,000 second mortgage for a charter school to purchase a building. The types of loans included a $100,000 loan to an environmental organization completing a capital campaign, a line of credit to a developer of affordable housing for $200,000, and $100,000 to a theater for working capital needed to produce a season of plays. Meeting and working with these entrepreneurial nonprofit leaders, and helping them to realize their organizations’ visions, is always challenging and interesting.
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Nonprofits Assistance Fund Welcomes a New Loan Officer Nonprofits Assistance Fund is pleased to announce the addition of a third, dedicated loan officer to our lending staff, Michael Anderson. As a Loan Officer, Michael will be responsible for advising nonprofits through the loan application and review process, as well as throughout the life of the loan. He will also deliver training workshops and provide technical assistance on financial management topics to nonprofits throughout Minnesota. Previously, Michael worked in the City of Minneapolis Office of Management and Budget. He holds a BA from the University of St. Thomas and a Master of Public Policy from the University of Minnesota's Humphrey Institute for Public Affairs, where he concentrated his studies in nonprofit financial management. Please join us in welcoming Michael to the Nonprofits Assistance Fund team. |
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