Working Capital Loans for Non-profits: What to Know
October 5, 2022
Non-profit organizations strive to meet the needs of their community by offering vital services and programs, but gaps in funding can make it difficult to accomplish these goals. A working capital line of credit and/or a business loan provide the financing necessary for non-profits to cover short-term needs and expenses, meet organizational goals, and serve others in dynamic and impactful ways.
We invite you to learn how working capital non-profit financing can support your organization. We will also provide you with information about the application process for a working capital line of credit and why we think Texas Gulf Bank is the best partner to help you grow.
Strengthen Your Non-Profit Group with Working Capital Funds
Non-profits depend on having enough available funds to maintain daily operations when they face unexpected emergencies or economic hardships, such as the pandemic. Without access to consistent funding, non-profits could be forced to cut essential programs, reduce staff, or shrink the areas in which they serve.
A working capital line of credit allows your organization to cover operational costs until permanent funding comes in from sources like private endowments, government grants, or individual and business donations. A line of credit can work similar to a credit card by offering your non-profit access to a limited amount of funds available to borrow as expenses and needs arise.
Interest is only accrued on the amount used from the line of credit, and borrowers must repay any used funds within a set amount of time, while also not exceeding their credit limit.
Lines of credit can be used to pay for expenses such as:
- Non-profit rent or mortgage payments
- Payroll
- Utilities
- Computer networks
- Program equipment and supplies
- Fundraising expenses
– Another option to consider is a small business loan administered through the SBA. This type of loan is ideal if you need to fund larger expenses that would allow you to serve a larger portion of the community or increase available services and programs.
You can also use a small business loan to fund the improvement of an existing building, expand office or warehouse space, or purchase larger items such as trucks or vans for transportation and delivery needs.
Non-profit organizations may frequently face the possibility of potential funding gaps, but a working capital line of credit or a small business loan can help bridge gaps and prevent disruptions in vital services for the community.
How To Apply for Working Capital Non-Profit Funding
Applying for a working line of credit or business loan begins with evaluating all aspects of your non-profit organization to determine if you qualify for lending. When you work with Texas Gulf Bank, we review the following aspects of your organization during our initial assessment.
1. Goals and history. We will examine the goals, current services and programs, and historical timeline of your non-profit. This assessment can provide us with a good overview of how your organization functions, its success and value within the community, and how loan funds will be used to achieve goals and make a lasting impact.
2. Financial status. We will review current and historical financial records, including organizational budgets, outstanding debts, fundraising expenses, and ongoing costs such as rent and payroll. This financial review should reflect the non-profit’s ability to manage budgets, maintain cash flow reserves, and demonstrate good fiduciary judgment.
3. Available documentation. We require the following documentation as part of the loan application process including but not limited to:
- Completed loan or line of credit application
- Three most current filed years of tax returns for your non-profit
- Three most current years of financial year-end statements
- Future revenue and expense projections
- Existing debts and loan agreements
4. Current funding sources. The financial assessment of your non-profit includes a review of major funding sources, including government entities and grants, private donations, business endowments, sponsorships, estate bequeathments, and any large donors with a substantial impact on annual budgets. Applicants should also provide information on previous successful capital fundraising campaigns.
5. Governance structure. The organizational structure of your non-profit is a critical part of a working capital funding assessment. We review the structure of your Board of Directors, a list of current board members, and any controls in place to protect against any financial or legal impropriety.
Once the preliminary loan assessment is completed, applicants should expect a decision about whether we can provide you with funding within approximately 2-3 weeks, which includes time to review all required documentation and clarify any questions that may arise.
Partner With Texas Gulf Bank Today
With over 100 years of lending experience along the Texas Gulf Coast, we understand the importance of serving the local community by investing in the people and organizations that make it great.
Texas Gulf Bank proudly offers quality and dependable financial services to non-profit organizations so they may continue to offer vital services and achieve their goals. To learn more about working capital and other financing solutions for your non-profit, sign up for our email newsletter to receive regular updates and helpful information.
Or, if you are ready to apply for a working capital non-profit line of credit, give us a call today! You can also fill out our contact form to begin the application process. We look forward to serving your organization.
All Loans Subject to Credit Approval