Non-Profits: Investing Emergency Funds For Future Stability

Non-profit organisations are sometimes faced with serious financial challenges. While it is generally not advisable to rely on board members to finance a non-profit, there are several other options to secure emergency funding. This could include reaching out to former and current donors, suppliers, board members and clients, increasing earned income, asking about discretionary funds, applying for emergency loan/grant programs, and crowdfunding.

In terms of investing an emergency fund, it is important to consider the level of risk involved. While keeping an emergency fund in a traditional bank savings account is a safe option, the interest paid on these accounts is often very low, and inflation may eat away at its value over time. Investing an emergency fund could help to preserve its buying power and even help it grow, but it also limits immediate access to the money and may incur withdrawal penalties.

If you do decide to invest an emergency fund, it is recommended to split it up, keeping a portion in a high-yield online savings account to cover short-term needs, and investing the rest. Some possible investment options include certificates of deposit, money market accounts, money market mutual funds, brokerage accounts, health savings accounts, and retirement accounts.

Reach out to donors, clients, board members and anyone invested in your nonprofit

When your nonprofit is facing a financial emergency, it's time to call all hands on deck! Reach out to your donors, clients, board members, and anyone else who is invested in your nonprofit's mission. Utilize various channels such as email, social media, phone calls, and even Facebook to get the word out. Don't neglect former donors who are no longer active, as they may be feeling charitable and willing to help. While relying solely on board members for financing is not advisable, they can be a great resource during a genuine emergency. Make sure to express your gratitude for any help received and avoid taking it for granted.

When reaching out, be transparent about your situation and ask for their support. Leverage your board members' networks and connections to expand your reach. It's also a good idea to provide updates and express your gratitude to your supporters frequently. Remember, it's okay to ask for help, and you might be surprised by the response you receive.

Additionally, consider increasing your earned income by raising prices on goods and services or offering backroom" services such as office space rental, human resources, accounting, fiscal sponsorship, or consulting. You can also explore options for discretionary funds, where some foundations allow senior staff to make small grants without a lengthy application process.

Remember, during a financial emergency, it's crucial to tap into your network and be creative in generating support for your nonprofit organization.

Increase income by raising prices on goods and services

Non-profit organisations sometimes face serious financial challenges. When this happens, increasing income by raising prices on goods and services can be a good strategy. Here are some detailed tips to help you increase income through price increases:

Timing is key:

The best time to raise prices is when your customers are most satisfied with your products or services. This could be after introducing improvements or enhancements that add value. You can also consider raising prices when you have a significant number of new customers or when your loyal customers have shown their willingness to support your business even with stretched wallets.

Communicate transparently:

Always notify your customers about price increases before they happen. This transparency gives customers time to plan and allows you to meet with them to renegotiate contracts. Be clear and empathetic in your communication, explaining the reasons for the price increase and any resulting changes to the product or service.

Be strategic with pricing:

There are different ways to adjust your pricing strategy. You can increase prices across the board, implement a series of gradual price increases, or raise prices on specific high-volume products. Consider creating different package sizes or introducing fees for certain services without raising the base price.

Enhance customer satisfaction:

Focus on providing excellent customer service to minimise the negative impact of price increases. Offer a wider variety of products or services, give customers the option to bundle offerings for a higher price, and improve your shopping experience.

Monitor and adjust:

Keep track of the results of your price increases by measuring sales, customer retention rates, and feedback. Use this data to refine your pricing strategy and make adjustments as needed. Stay up to date with industry news, competitors' pricing, and customer preferences to inform your decisions.

By following these steps, you can increase income by raising prices on goods and services while minimising negative impacts on your customers and organisation.

Ask about discretionary funds and emergency loan/grant programs

When it comes to investing a non-profit's emergency fund, there are a variety of options to consider. Here are some detailed suggestions on "Ask about discretionary funds and emergency loan/grant programs":

Discretionary Funds

Discretionary funds refer to grants or donations that are distributed at the discretion of the funder, often without a lengthy application process. When facing an emergency or unexpected financial challenge, it is advisable to call your current funders to inquire about the possibility of discretionary funds. Some foundations allow senior staff to provide small grants without the need for a full application. Reaching out to your funders and expressing your situation honestly can help you access these discretionary funds.

Emergency Loan/Grant Programs

In addition to discretionary funds, there are dedicated emergency loan and grant programs designed to assist non-profits facing financial difficulties. These programs can provide low-interest loans or grants to help non-profits address sudden cash flow needs, bridge funding, upfront capital for events, facility renovations, or debt consolidation.

One example of such a program is the Arts Loan Fund (ALF), which offers low-interest loans to small and mid-sized arts organizations. The Open Road Alliance is another philanthropic initiative that provides both short and long-term financial solutions to non-profits facing unforeseen circumstances. They aim to disperse $50 million in loans to nonprofits by 2023.

To find emergency loan or grant programs, you can also try searching through online platforms or directories, such as Foundation Directory, which may have a specific section for emergency funds. Additionally, your local United Way or community foundation may be able to provide information on emergency funding opportunities in your area.

Additional Tips

• Utilize Multiple Methods to Raise Cash: Cast a wide net by using various channels such as email, social media, phone calls, and personal connections to reach out to potential donors.
• Engage Your Supporters: Keep your current donors informed and ask them to spread your message within their networks. Show gratitude and provide frequent updates to those who support your organization.
• Revisit Your Finances: Analyze your organization's finances and consider ways to reduce expenses, increase income, or adjust your business model. Communicate these plans to your supporters to demonstrate how you intend to avoid future cash flow issues.

Use crowdfunding platforms to raise funds

Non-profit organizations can face serious financial challenges and one way to secure funding is through crowdfunding platforms. Crowdfunding is an excellent fundraising tool to raise money and excitement about specific nonprofit programs, capital campaigns, and events. It is an affordable way to reach a wider audience and meet your fundraising goals.

Crowdfunding campaigns work best with set start and end dates and are ideal for funding specific programs or projects. This type of campaign is highly shareable, encouraging supporters to spread the word and broaden your reach.

There are several crowdfunding sites to choose from, many of which offer similar features. These include customizable donation pages, social sharing buttons, and the ability to add images and videos to your campaign. Some platforms offer additional features such as goal thermometers, matching gifts, and recurring donation options.

When creating a campaign, it is important to set a realistic fundraising goal and convey a clear message about why your organization needs the funds. It is also crucial to promote your campaign through various channels such as social media, email, and text messages.

• Donorbox: Offers customizable donation pages, mobile-friendly options, social sharing buttons, and matching gifts. There is a 1.75% platform fee and processing fees.
• Fundly: Allows customization, provides fundraising guides, and has a 0% platform fee. Processing fees through Stripe are 2.9% + $0.30 per donation.
• Classy: A customizable platform with branded receipts, campaign emails, and impact blocks to showcase the effect of donations. Pricing starts at $199 per month plus processing fees.
• Fundrazr: Enables users to add pictures, videos, and stories, and provides personalized campaign improvement tips. There is a 0% platform fee with processing fees through PayPal or Stripe.
• GoFundMe: Easy to set up, with in-platform messages, no minimum amount, and no campaign time limit. There is a 2.9% + $0.30 processing fee per donation.
• CauseVox: Offers targeted appeals, recurring donation options, and automatic email updates. The basic plan has a 0% platform fee, with tips encouraged from donors.
• Givebutter: Provides custom fundraising pages, a visual goal thermometer, recurring donation options, and designated fund selections. There is a 2.9% + $0.30 processing fee, with an optional 3% tip to cover fees.
• Donately: Features mobile-responsive forms, a fundraising thermometer, and social media sharing buttons. The DIY plan has a 4% platform and processing fee.
• Chuffed: A platform for social development organizations, offering customizable donation pages, donor perks, and the choice of time-limited or infinite campaigns. There is a 0% platform fee, and donors can opt to pay processing fees.
• Handbid: Includes peer-to-peer fundraising and combines crowdfunding with charity auction events. Offers ticketing, registrations, reporting, and goal-tracking. The processing fee is 3.5% + $0.30, with customizable packages for nonprofits.

Take out a non-profit-specific business loan

Taking out a business loan is a common way for non-profit organisations to secure funding. However, it is important to note that traditional lenders are often less open to working with non-profits and may provide loans with less favourable terms.

Non-profit organisations can apply for loans from community development financial institutions (CDFIs), loan funds, or corporate giving programs. CDFIs are lenders that specialise in offering financial assistance to nonprofits and are usually non-profits themselves, although some may be banks or credit unions. They often charge high-interest rates for small loan amounts, typically offering loans of $50k or less. Nonprofit loan funds, on the other hand, offer lower interest rates than CDFIs, and in some cases, the loan may be interest-free.

Traditional bank lenders are an option for non-profits, although it is less common. Banks may charge higher interest rates on loans to non-profits due to the higher risk involved, and extensive documentation is required to demonstrate the ability to make on-time payments.

Business credit cards can also be used as a source of funding for daily and fixed expenses, but it is important to be mindful of the high-interest rates that may be charged if the balance is not paid in full.

When considering a loan, it is important to evaluate the financial health of the non-profit organisation. Lenders will typically assess the organisation's creditworthiness, capital, cash flow, and collateral. It is also crucial to have a specific need for the loan, such as building new infrastructure or hiring new employees, and a reasonable plan for repayment.

Frequently asked questions