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The Nonprofit Finance Fund (NFF) has found a strong market for its nonprofit business analysis and other advisory services, in addition to its original role as a lender to nonprofits. Founded in 1980, NFF is based in New York City with a regional office in Philadelphia.
Alice Richardson, associate director of NFF’s advisory services in Philadelphia and a former community development lender at J. P. Morgan and Co Inc. (now JPMorgan Chase and Co.), explained: “As NFF began lending to nonprofits in the 1980s, it developed expertise in financial areas and an understanding of the challenges faced by nonprofits. We’ve often found that a loan alone isn’t the answer and that nonprofits need education and technical assistance as well.”
Clara Miller, NFF’s founder, president, and CEO, has observed that most nonprofit executives are mission-focused and very knowledgeable in their specialized areas but often need assistance in managing the business side of their organizations.
NFF works with a broad range of nonprofits, primarily in arts and culture, child care, and social services. Its Philadelphia office has a service area of southeastern Pennsylvania, Delaware, and (in partnership with NFF’s Morristown, NJ, office) the state of New Jersey.
NFF’s nonprofit business analysis consists of collecting and analyzing a nonprofit’s audited statements, budget, and issues facing the organization, sharing its findings with the nonprofit’s management team, and preparing a report. NFF says this is especially useful for nonprofits that are facing change or strategic options, such as buying a new facility or starting a new program.
Gar Kelley, NFF’s vice president for the mid-Atlantic region, observed: “Nonprofits sometimes consider facility projects or expansion plans that are too ambitious. NFF’s education and technical assistance helps organizations think about the long-term implications of proposed projects or expansion of their regular operations.”
In an outgrowth of one particular nonprofit business analysis, the board of directors of Children’s Village Child Care Center in Philadelphia decided to establish a building reserve fund to plan for future expansion and took steps to plan for personnel needs.
NFF launched its nonprofit business analysis service in 2002 and has conducted analyses for more than 500 organizations nationwide. Richardson, who manages the analysis work in the Philadelphia office, said business analysis “can be a complement to strategic planning and enables nonprofits to be more pro-active about their financial situation. We often establish partnerships with funders to deliver comprehensive services but also provide the analysis as a stand-alone fee-for-service product to individual clients.”
In another advisory service, NFF provides nonprofits with a comprehensive building assessment that includes a savings plan. Board members and staff use the assessment report to plan for long-term facility investments.
Cassandra Archbold, manager of financial services with NFF in Philadelphia and a former bank commercial lender, explained that NFF customizes its loans and its advisory services to fit the needs of its clients. She explained, “We are committed to lending to nonprofits that may not have access to mainstream financing, and we structure loans according to a nonprofit’s unique financial situation. We might set a payment schedule that corresponds to a nonprofit’s anticipated pledge payments. We often lend unsecured for the benefit of the borrower.”
The chart above is a sample of the kind of information the Nonprofit Finance Fund provides as part of its nonprofit business analysis service.
NFF provides loans with flexible terms for facility projects, specifically for acquisition, construction, and renovation, as well as for soft costs such as relocation. It also provides bridge loans, lines of credit, working capital, and loans for organizational growth. NFF sometimes lends money for equipment needs such as computer hardware or vehicle purchases. Loan amounts generally range from $100,000 to $2 million.
A typical NFF borrower is a nonprofit with a 501(c)3 IRS designation, at least three years’ operating history, and an operating budget of $500,000 or more. Loans are made out of a single fund managed by NFF at its main office. Underwriting is conducted at NFF regional offices.
In addition, NFF provides planning grants of $1,000 to $20,000 to help organizations assess the feasibility of facility projects or new business ideas.
In a child-care initiative, NFF offers capital and technical assistance to providers wanting to improve the quality of their programs and facilities. NFF has provided $5.8 million in capital grants and $1.8 million in loans for the renovation and construction of 120 child care centers in southeastern Pennsylvania.
NFF’s national fund has made 600 loans totaling $172 million since its inception in 1980. As of the end of 2007, the rate of write-offs as a percentage of cumulative loans closed was 0.3 percent, while the delinquency rate on outstanding loans 90 days or more late averaged 2.9 percent, according to NFF in New York City.
In the region served by the Philadelphia office, NFF closed over 40 loans totaling nearly $18 million in calendar years 2005, 2006, and 2007.
On the investment side, NFF has a $20 million allocation of new markets tax credits (NMTC) to help finance community facility projects in low-income communities. Nationally, NFF has approved more than $10 million in NMTC financing. No NMTC investments have been closed in the region thus far.
NFF’s Philadelphia office staff observed:
Opportunities for bank investments, loans, and services with NFF include partnerships on large NMTC projects; investments, which may be targeted geographically, in NFF’s loan fund; lending to nonprofits in conjunction with NFF; and referral to NFF of clients that banks cannot assist, and vice versa. Fifteen banks are investors in NFF’s loan fund, representing approximately 55 percent of total dollars in the fund, NFF said.