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Wednesday, September 17, 2008

Daily Observations - 501 C 3's

501 c3's - what are they and can we finance them.? A 501 C3 is the IRS designation for a Non-Profit Corporation. But can we finance a Non-Profit Organization?

If you remember a couple of weeks ago we talked at length of financing a Religious Organization, which is a 501 c-3, so the answer then is yes. But here's the next question that is asked of us many times during the month, Can I finance a 501 C3 through the SBA programs?

The answer is categorically NO. SBA allow financing for only profitable businesses, not non-profits. So how do you then finance a non-profit, the answer is as a straight commercial loan. The banks do finance non-profits as commercial loans providing that the cash flow is there. Many non-profits are backed by one or two major donors, and many times they are more than willing to personally guarantee the loan.

The problem we are seeing today is that the traditional lenders are also now shying away from any non-profits because they cannot guarantee their repayment source. As the economy changes donations for non-essential functions usually starts to deviate as well. As the lenders look to the repayment of a loan by steady donations they are starting to get scared of this type of lending.

There are lenders that still will lend to proven non-profits it just takes more digging to locate them. Don't give up, they are out there.

For more on non-profit lending visit loanforbiz.

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