Preparing Your Organization To Apply For a Loan
If we are considering a loan at our organization, is the first step putting together a business plan or seeking lenders? If your organization is considering pursuing a loan it is best to first evaluate the intended purpose of the loan-- how the funds will be used. If the loan is for facility related financing or general operating working capital, then a business plan may not be necessary. If the loan funds are desired to support growth or a new line of services, then a business plan would be necessary for most lenders. It's ideal to speak to the lenders to identify your organization's intended use of the funds and explore what information the lender will require to assess your loan request.
If you don't own the property what can you use as collateral? Collateral requirements will vary by lender and are often determined by the intended purpose of the loan. Many lenders, including NFF, are flexible and creative in structuring loans and will assess each request to determine whether collateral is necessary, as well as what collateral is available and appropriate for the loan.
Regarding the four things that lenders look for - can strengths in some offset weaknesses in others- particularly as many NFP's have been weakened financially in recent years? Yes, not all criteria carry the same weight in a lenders evaluation and strengths can offset weaknesses. Additionally a lender may take into consideration if the organization is in the process of strengthening the weaknesses or if there is a viable plan to improve the weaknesses.
Do you refer nonprofits to other possible lending sources if NFF will not provide a loan? Yes! NFF often refers nonprofits to other organizations which may serve as a resource to assist the organization.
How possible is it to borrow for space improvements on a leased property? Yes, it is possible to borrow for improvments to leased space. NFF often provides financing to organizations for renovations and improvements to lease facilities.
Do you offer lending in South Carolina? We do not currently provide financing in South Carolina. NFF mainly serves the Mid-Atlantic, Northeast, Midwest, and West Coast.
What is your current and/or typically rates to borrower? NFF interest rates are based on the WSJ Prime Rate of Interest plus a margin and may be fixed or variable. As the interest rate varies depending on the loan type and structure it is best to contact the lender in your local market to obtain a quote for your loan need.
Does an Executive Director have to give personal information and have a credit check on themsleves for a loan for the business. If so, if the executive director leaves after the loan is approved how is it handled. NFF does not require personal information from the Executive Director or any other member of the management team or board of directors nor does NFF require credit checks for these individuals.
If you are ready to start shopping for a construction/Permanent loan, is there a maximum amount for this, and is it based on the building asset? Yes, most lenders have a maximum loan restriction, which is determined by their loan program criteria which may 1) limit the total amount of loans that they may provide to an organization and it affiliates and 2) limit the loan for the construction-permanent loan for the project to a set percentage of the value of the property, which can vary from 65% to 90% depending on the lender and project.
Will lenders make loans that are collateralized by the receipts of a capital campaign? Yes, in fact NFF has provided many loans which bridge capital campaign proceeds to be collected on committed pledges and are secured by capital campaign pledges.
Much of your examples deal with short term loans. What length would constitute 'long term,' and how common are those kinds of loans? Long term loan terms may vary by lender, from 7 year to 25 years. Many CDFIs offer terms of 7 to 15 years, while bond financing provides terms of 20 to 25 years.
Is a site visit required as a part of the loan process? Yes, NFF requires a site visit and meeting at an organizations location of operations as well as a site visit of the property if facility related financiing is requested for a new project or location. We feel it is an important part of the process and it is also the highlight as we have an opportunity to witness first hand where the services are delivered to the community - where the magic take places.