Microfinance

Collaborative NFP Loan Fund

The collaborative NFP loan fund provides financial support to non-profit and charitable organizations that the COVID-19 pandemic has negatively impacted.

Loan Details

Loan Type

Line of Credit or Term Loan

Loan Amount

Between $1,000-$20,000 established organizations

Up to $3000 for start-ups and organizations operating for less than 2 years.

Fees and Interest Rates

Prime + 4%

Repayment Term

Up to 3 years, with an option to pay the interest-only for up to 8 months

APPLICATION REQUIREMENTS

Financial statements and other essential supporting documents are required as part of the loan application. Please note that failure to submit ALL of the required documents listed will result in delays in processing your application. For the application package to be considered COMPLETE, you need to submit ALL of the following:

  1. Completed Collaborative NFP Loan Application

  2. 24 month projected cash flow
    1. 12-month during COVID-19 (while organizational operations were physically closed due to pandemic restrictions)
    2. 12 months post COVID ( once organizational operations reopened to the public)

  3. Annual Report (if available)

  4. 2 years audited financial statements or notice to reader,
    1. or 2 years of operational activities (i.e. tracked revenues and expenses)
    2. or 1 year of financial statements for start-ups or new non-profits/charities

  5. For loans over 10K, organizations must provide 3 years of financial information.

  6. 2019 debt service ratio qualification. Organizations must be able to demonstrate through financial records that their business was negatively financially impacted by the public health measures put in place due to COVID-19

  7. Letter from the organization's Board of Directors endorsing the loan application

  8. 3- year grant history if applicable

  9. Complete interview questionnaire

  10. Articles of Incorporation

  11. Board resolution

  12. Photo ID of signing authority (compliance with Alterna Savings Policies)

FAQ's

Non-profits with limited financial expertise are often hesitant to take loans and incur debt. However, the right credit solution can be a valuable tool to solve cyclical financial shortfalls and allow your organization to capitalize on key opportunities.

Operating Line of Credit

An operating line of credit (LOC) gives organizations access to funds within a set limit when and if they need them. LOC Interest rates are lower than most credit cards and some other credit solutions, and interest is only incurred on the funds taken out of the account. There is no fixed repayment schedule except for monthly fees and interest charges. The organization can pay down the LOC as their finances allow, and those funds can be reused as needed. A LOC's is most useful as a tool to smooth out an uneven cash cycle rather than to finance larger purchases. For example, a LOC could cover bill shortfalls (including payroll) in lean cash months.

Term Loans

A term loan is a set amount of money borrowed over a fixed period. The fixed period is called the term of the loan. Term loans are often used to finance large projects such as purchasing capital equipment, real estate, or fund renovations.

Opportunity costs are the potential benefits businesses miss when choosing one alternative over another. Because opportunity costs are unseen, they can be easily overlooked. Understanding the potential missed opportunities when a business decides on one project or path over another allows for better decision-making. It is fundamental to perform a cost-benefit analysis of a project or undertaking before accepting or rejecting the idea. Rejecting an idea based solely on the cost of the project without taking into account the opportunity that the project represents can negatively impact your organization's growth. Looking at the opportunity cost of each choice can help you find the most valuable opportunities for the long-term health of your organization.

The Ontario Non-Profit Corporations Act and the Canada Non-Profit Corporations Act regulate these issues. Typically, the organization's directors will not be liable, as it is assumed that they were acting in good faith and with reasonable skill and knowledge. Some may have purchased directors' and officers' liability insurance to help in a financial collapse. If they are found not to have acted in good faith, they can be held personally liable for the outstanding debts of the organization.

  • Solid strategic plan/business plan
  • Complete financial plan
    • Current financial statements
    • Cashflow projections: to show how you can pay back
  • Review your organizations structure and rules
    • Are you allowed to borrow?
    • Does a special resolution need to be in place?
  • Build financial literacy within your organization

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