How to Choose the Best Lending Partner for Your Nonprofit

Nonprofits rely on lending solutions to make up the difference in funding between what donors and grants provide and what they need to operate. That's especially critical now, as an uncertain economy can translate to volatility in donations.

In a rising interest rate environment, it can be tempting to simply look for the lender offering the lower rate. After all, the more money you can save on a loan, the more you can invest in your nonprofit's mission.

But the rate is just one part of the equation. Ask yourself these five questions when choosing a lending partner for your nonprofit:

What type of lender do we want to work with?

There are many options for finding a loan, each with its own pros and cons. Some nonprofits might look for loans from other nonprofits or community development financial institutions, while others will stick with more traditional banks or credit unions. It can be helpful to build a relationship with financial institutions like banks or credit unions, since they may be able to provide more comprehensive support.

No matter which route you take, it's important to think about how the relationships could change or grow in the future. If you run into financial challenges in the future - or need funding to take advantage of an opportunity - having a strong, long-term relationship with a lender can make it much easier to quickly access funding.

Will this lender customize a loan for our organization?

Your nonprofit is unique, so you don't want a "one-size-fits-all" solution. Look for a lender that can work with you to find terms that will enable you to access the capital to meet your goals. You also want a lender that can offer flexibility on those loan terms should your circumstances change down the road. For example, a good lender can both:

• Assist you with building a line of credit to cover a cash flow crunch during the slow season for donations.
• Structure a business loan to purchase equipment or software, with terms that make sense for your organization.

What other services can this lender offer?

Your nonprofit likely has other financial needs with which it could use assistance. One of the benefits of getting a loan from a bank is that they can often help with different facets of your nonprofit's financial picture, providing tools and services aimed to assist with taxes, asset management, or other financial services. Using a single bank for lending, as well as other financial services, can streamline the process, and free up your time to focus on running your nonprofit and furthering its mission.

Wintrust, for example, provides loans, as well as direct-service, tax-exempt bonds, flexible leasing solutions, and asset management services, to nonprofits. In addition, Wintrust offers nonprofits treasury management services and a specialty money-market solution that provides up to $3.75 million in Federal Deposit Insurance Corporation (FDIC) insurance.

A good banker will get to know your organization and can act like an extension of your organization's finance team, able to work collaboratively to find tax-efficient, low-cost solutions to a range of financial challenges. As the relationship grows, they'll be able to understand your organization holistically, beyond the story told in your financial documents.

Does the lender have experience working with nonprofits?

Your needs are different than small businesses, and you want to work with someone who not only understands that but also has experience working with organizations like yours, understanding the intricacies of tax-exempt financing, and the different regulations to which some nonprofits are subject.

A lender that's comfortable working with nonprofits will:

• Have an easier time understanding the challenges facing nonprofits in today's landscape.
• Be familiar with the decision-making processes at nonprofit organizations, and how it differs from traditional small business loans.

Experienced nonprofit lenders may also have a greater ability to adjust loan terms or come up with innovative solutions tailored to your needs.

Are there additional fees?

While the rate is typically the biggest cost associated with a loan, there can be other significant fees that can make debt more expensive. When evaluating loan terms, make sure to consider not only the interest rate, but also origination fees, lawyer fees, and any other charges involved in the transaction.

Choosing a lender is one of the most important financial decisions that your nonprofit can make, and it's not a decision you should make based on any single factor. While the interest rate is certainly an important aspect, thinking about the full picture discussed above can help you feel confident when making your selection.

At Wintrust, our experienced lending team is ready to partner with you so your nonprofit can have the financial security it needs.

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