Article Summary
- Most nonprofits do not qualify for SBA loans, with only limited exceptions like disaster relief or specific programs.
- Many nonprofits face cash flow challenges, increasing the need for outside funding.
- SBA eligibility may apply in special cases, such as subsidiaries or community development roles.
- Nonprofits often rely on alternatives like grants, CDFIs, and nonprofit-friendly lenders.
- Choosing the right lender depends on experience, flexibility, and transparent terms.
Can Nonprofits Get SBA Loans?
Nonprofit organizations are a foundational part of American culture, deeply rooted in volunteerism, philanthropy, and community action. Nonprofit organizations frequently need funds beyond the contributions they receive and other funding they secure. While SBA loans are sometimes explored, most nonprofit organizations are not eligible and must rely on alternative funding sources.
What Are Nonprofit Organizations and How Do They Work
Nonprofit organizations are those that function to further a mission, social cause, public benefit, or shared goal. There are no private owners. A group of leaders oversees the organization to ensure it stays true to its public goal. Money is never paid to members or leaders as dividends, and any surplus revenue goes right back into running and improving the mission and the services of the enterprise.
Nonprofit organizations can pursue a variety of funding sources to support their missions, including individual donations, corporate donations and sponsorships, membership dues, program fees, fundraising events, selling products or services that align with the mission, bequests and planned giving, endowment income, and foundation and government grants.
How Many Nonprofits Need Loans
According to survey data from the Nonprofit Finance Fund (NFF), 36% of the organizations surveyed ended 2024 with an operating deficit, the highest in NFF’s 10 years of survey data. 52% of survey respondents indicated they had 3 months or less of cash on hand, and 18% had one month or less of cash on hand. 86% said high costs due to inflation have impacted their organizations and clients. Thus, securing financing for nonprofit organizations is critical.
SBA Loans for Nonprofit Organizations
In times of growth or crisis, nonprofits often ask, “Are SBA loans for nonprofit organizations available?” The short answer is most nonprofits are not eligible for SBA loans, but there are a few exceptions:
- Some licensed nonprofit childcare organizations may be eligible under specific community development or SBA micro loan programs.
- If your organization is a community development corporation (CDC), you may qualify to administer SBA 504 loans or receive indirect SBA support.
- SBA Disaster Loans, available to private nonprofit organizations and charities to repair or replace damaged property during a declared disaster.
- If you are a nonprofit with for-profit subsidiaries, the separate entities may be eligible for SBA loans if they are properly registered and meet SBA criteria.
Alternatives to SBA Loans for Nonprofit Organizations
Here are some nonprofit-friendly funding options: Community Development Financial Institutions (CDFI’s), fiscal sponsorship programs like Crowded, grant funding, crowdfunding, banks and credit unions, corporate giving programs, and nonprofit-friendly lenders.
How to Choose the Best Lending Partner for Your Nonprofit
As you look for nonprofit-friendly lenders, consider first: does this lender have extensive experience working with nonprofits? Second, will this lender customize a loan for our organization? Third, what services can this lender offer? Fourth, what are their fees?
Seek Expert Business Financing Assistance
Contact CAB Capital, based in Mt. Pleasant, SC. We offer small businesses custom-matched financing solutions, including SBA, that can be faster or more flexible than other financing solutions. We have access to a vast suite of more than 150 products from a group of 67 different lenders, so we can ensure you get the funds and the terms you are looking for.