Non-Profit Small Business Loans: 2 Things to Know

‍Finding loans for a small business has always been a tough process, but with the end of the small business stimulus program after COVID, things are more stressful than ever. This is true particularly for non-profit small businesses, which have trouble finding loans throughout the COVID epidemic. With the CARES Act ended and the PPP forgiveness beginning, there are other places you'll need to look to find funding for your non-profit. Here are two things that you should off the bat.

The SBA and Non-Profit Loans

You cannot get a traditional SBA loan for a non-profit business. The SBA doesn't offer 501c3 business loans, which means that they cannot be utilized by non-profits. However, other programs offered through banks by the SBA might help your non-profit. A good article on this subject from Financial Solutions Now has an explanation for these purposes and information. The article mentions that a line of credit is a good alternative to the traditional SBA loan. A line of credit is a good alternative that can be found from a bank, often backed by the safety of the SBA. Lines of credit work similarly to a credit card. The bank, who works with the SBA to underwrite the line of credit, will offer you a maximum amount. You can withdraw up to this amount. You can withdraw funds at anytime and can be paid back the amount as needed. Lines of credit offer similar financial support to a loan, but unlike a loan, they can be taken out and repaid at a rate that most benefits your business.

Other Forms of Loans

One of the best forms of small business lending that I can recommend is the microloan, which I especially helpful for a non-profit business looking for financial support. Microloans are smaller loans, but for non-profits they often have different perks .NerdWallet writer Benjamin Pimentel wrote a good piece about the different places to find microloans in the US for nonprofits, and what you can do with that information. Outside and private organizations can provide loans and financial support as well, but microloans are often the best option for small business non-profits looking to get their start. Check out Pimentel's writeup for some of the different options that are available to you!

Our Two Non-Profit Loan Tips

Here are the two tips that I found most important to pass on.

1. Traditional SBA loans don't apply to non-profits, but banks can offer SBA-backed lines of credit. This is a strong option, though it does have some drawbacks. 
2. Consider microloans for your small business, which are smaller in pay but provide the help that you need in a way that is easier to pay back and understand.