Kate.Barr
Forum Replies Created
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That’s a hard path to take. The risk for this option depends a lot on how well developed the plan is to start to generate revenue, either through contributed or earned income, and whether there is enough capacity and commitment to implement that plan. If the organization would be starting from scratch to try to build up more revenue, there’s a lot of pressure on the new executive director to raise money to pay the loan rather than to achieve the organization’s goals. Propel Nonprofits has a loan fund for nonprofits and our team would have a lot of questions with a request like this. It would be more likely to have a loan later in the organization’s life cycle to grow programs or to add to a development team that had some traction.
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Since inflation is impacting organizations differently depending on their largest expenses, I’d suggest they connect with another organization or two who do similar work. Nonprofits that work in the food ecosystem, such as meals programs, daycare and shelters, are seeing much higher food costs. Nonprofits with payroll has 80% of expenses are experiencing inflation through age pressures.
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Thanks, I appreciate that there’s a strategy grounding your reserves.
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The current market environment for liquid accounts is so much better now than it was a year and two ago (although the context for that is higher rates for borrowing, of course.) Many organizations kind of gave up on trying to get better returns on their liquid funds so it’s good to be reminded to pay attention again and ask your bank or other advisor for the options for liquidity. Money market accounts and laddered certificates of deposits are a pretty good option now.
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Thanks for sharing this great summary, Bruce. Do you have a designated amount of operating reserves in a more liquid account?