How NOT to Loan Money to a Nonprofit Organization

Loans can be a vital, strategic tool for a charity. At the most basic level, donations do not always arrive before the expenses they are needed to cover. At such times, credit – in the form of a bridge loan, for example – might be the perfect tool to allow a nonprofit to survive until the particular donation or grant is received.

The simplest way to lend money to a charity is for a donor to just give the organization the needed funds – either through cash, check, or wire transfer – with the (often unwritten) understanding that the funds will be returned at an agreed upon time. As no financial institution is involved, this type of loan is given in a relatively shorter amount of time, less complicated (no/less forms), and cheaper (no/lower interest rate and associated fees).

Nevertheless, an organization or donor might not want to procure a loan this way but rather through a registered financial institution; such as a bank, credit card company, or insurance company. Continue reading

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Understanding Credit in Israel, Pt 1: Types of Credit

It is logical to assume that if a bank wants to appeal to the nonprofit community then it has to understand the nonprofit organization’s way of thinking (that’s where I come in).  The opposite should also be true.  If a charitable institution wants to appeal to a bank then it must understand the bank’s way of thinking. This is especially the case when using or applying for credit from a bank.

In the past two months alone, four organizations have turned to me trying to understand why their bank was acting a certain way when it came to credit. A few examples: Continue reading