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Loans: Leveraging Support for the Golden Ticket, er, Grants
Part Eight
by Amanda Bales, Research Specialist, GrantStation
Last week, we took a closer look at what sort of technical assistance is available to nonprofit organizations through local, state, and federal government programs as well as through private institutions. This week, we widen our vista to include loans.
In the opening sequence of Charlie and the Chocolate Factory, Charlie Bucket wanted a Golden ticket. But his one chance, his birthday Wonka Bar, was empty. Poor Charlie, he didn't have the capital to finance another purchase; there would be no Chocolate Factory for him. And then, by accident, Charlie finds 50 pence, buys a Whipplescrumptious Fudgemallow Delight, and enters Willy Wonka's magical world.
If grants are the golden tickets of the philanthropic world, loans may well be the 50 odd pence that can help leverage that ticket and lead nonprofit organizations to their goals. Even if the golden grant money never arrives, loans are a viable source of funding all on their own. Loans may be able to provide the necessary start-up capital, gap-funding, purchasing power, etc., that is necessary to create an institution that grantmakers find desirable. In addition, many grantmakers also offer loan programs. Green Communities, for instance, provides grants, financing, tax-credit equity, loans, and technical assistance to developers who meet Green Communities' criteria for affordable housing. Establishing a healthy relationship with a grantmaker through a loan program may be a good introduction that will lead to grant support.
Another reason to consider loans? Grants do not always offer funding for a nonprofit organization's specific needs. Operating costs or equipment purchases, for instance, might not be considered appropriate use of certain grant monies. Specific loan programs might offer funding for highly specific projects, but include fewer directives for the loan's use within the project. The National Trust for Historic Preservation Loan Fund, for instance, provides loans to organizations that use historic preservation to support the revitalization of underserved and distressed communities. The funds can be used for any part of the project, but must be used for historic preservation as part of a community revitalization project. The U.S. Department of Agriculture maintains a Guaranteed Business and Industry Loans Program that offers guaranteed loans for construction, renovation and development, land and building purchase, machinery and equipment, pollution control and abatement, start-up costs and working capital, and processing and marketing facilities. The loan can be used for almost any part of a project, as long as that project is rural development.
These are just a few of the programs I came across while conducting research for the Washington Infrastructure Database. Many guaranteed and low-interest rate loans are available through a variety of local, state, and national programs. These are not loans intended to turn a high profit for the lender, but rather to encourage and aid nonprofit organizations and other philanthropic institutions.
In particular, institutions that seek to serve rural, disadvantaged communities have a large variety of loans available. The Rural Community Assistance Corporation's (RCA) Loan Fund seeks to serve low- and very-low income rural residents by offering financial support to nonprofit organizations, municipalities, and tribal governments for providing a comprehensive array of services including affordable housing development, environmental infrastructure, and community facilities in rural locations. Washington State's Coastal Loan Fund provides supplemental financing for expansion and start-up projects of small businesses that create jobs in areas affected by declines in fishing and timber industries. It also offers low-interest loans for the purchase of technical assistance or community development strategies. The U.S. Department of Agriculture maintains a Community Facilities Direct Loan that is available to public entities such as municipalities, counties, and special-purpose districts, as well as to nonprofit corporations and tribal governments for developing essential community facilities in rural areas and towns of up to 20,000 in population.
However, disadvantaged communities aren't the only beneficiaries of loans. There are loans available for nearly any philanthropic pursuit, from projects that contribute to the diversification of the forest products industry in the State of Washington to projects that develop housing for domestic farm laborers nationwide.
Grants may seem like the only way into the chocolate factory, but, luckily, there's more than one factory and philanthropic funds aren't wholly governed by a madman with a cane. Loans may not sparkle quite as much as grants, but they can provide necessary funding and might be valuable tools for philanthropic institutions to strengthen their grant applications and make meaningful connections with grantmakers.
Next week, we'll discuss the helpful role rebates can play in the energy crisis.
Amanda Bales recently joined the GrantStation staff after completing her Masters of Fine Arts degree. Amanda acted as the lead research specialist in the research and development of the soon-to-be-launched online Infrastructure Database for the state of Washington. In the course of her research, she familiarized herself with the variety of support available to nonprofit organizations through technical assistance, loans, and rebates.
Tracks to Success is edited by Katy Mulcrone.
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