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

Understanding Credit in Israel, Pt 2: Bridge Loan vs. Line of Credit

In a previous post, I mentioned that a loan and a line of credit serve the same purpose.  While that may be true in a broad sense, they actually can be quite different.  Hence, the different names.  The bank will look at both types of credit the same way, evaluating the amount of credit requested against the amount and type of collateral offered.  The customer, however, only cares about one thing, which option is cheaper. Continue reading

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