Many congrats to the Nonprofit Loan Fund (NPLF) of Tucson and Southern Arizona for being recognized by the U.S. Department of the Treasury as a Certified Community Development Financial Institution (CDFI). This designation will give NPLF access to loan funds through various Department of Treasury programs.
We have profiled NPLF previously on our blog for the good work it does providing financing to promote economic and community development in distressed and underserved areas. Don Jenks, Executive Vice President and Regional Credit Administrator for Bank of Tucson, chairs the NPLF board.
As Don pointed out, “[The NPLF] system is a win-win. Investors make a return on their investment while also helping many wonderful nonprofit organizations make a difference in our community.”
NPLF has provided nearly $2 million in loans to local nonprofits to help strengthen operations, bridge cash-flow gaps, further their initiatives and make them financially sustainable. Investors receive 2% interest, while NPLF lends money out to local nonprofits at approximately 8% interest rate. Loans range from $10,000 to $200,000 for up to five years.
After receiving the CDFI designation, NPLF applied for and will receive operational funds in the first quarter of 2018 to help run its operations. This funding will allow NPLF to bring on an additional staff member and free up the executive director to market the loan services available through NPLF to local nonprofit organizations.
“Loan demand from local nonprofits has been very strong this past year,” said Don. “More nonprofits are recognizing how NPLF can help them, but we still need to do a lot more to educate the nonprofit community about how an NPLF loan is structured to work for an organization that may not qualify for a conventional loan.”
The NPLF board plans to apply for additional funds from the U.S. Department of Treasury next year as well, this time to fund capital rather than operations.
“In the meantime, being a CDFI will also qualify NPLF to apply for community reinvestment act (CRA) funds from banks,” said Don.
Arizona Daily Star wrote about the CDFI designation for NPLF, pointing out that “NPLF is the only local CDFI to target nonprofit organizations throughout Southern Arizona.”
Locally, beneficiaries of NPLF loans include Southwest Folklife Alliance, Esperanza en Escalante, International School of Tucson, True Concord, Tucson Botanical Gardens, YWCA of Southern Arizona and more.
Many of the organizations have provided testimonials for NPLF’s website, including:
“’The NPLF loan made it possible for Tucson Botanical Gardens to move forward with confidence on major financial commitments.’ An NPLF loan was bridge financing during the pledge phase of a capital campaign [and] ensured that they could complete the new Visitors Center in time for opening of a new exhibit.”
NPLF loans have helped nonprofit organizations in our community strengthen Tucson’s reputation as a destination, educate Tucson citizens, build affordable housing and much more. It is a model for the dynamic relationship private citizens, businesses and nonprofit organizations can build to transform their communities for the better. And now, NPLF adds a Federal government agency to that formula for success.
Bank of Tucson is proud to support the efforts of Don and NPLF to elevate our community.
We are proud to be a founding member (through our president, Mike Hannley) of the Nonprofit Loan Fund (NPLF) of Tucson and Southern Arizona. Established in 2014, NPLF has made nearly $1.3 million in loans to local nonprofits to help strengthen operations, bridge cash-flow gaps, further their initiatives and make them overall financially sustainable.
Some of the many worthy recipients of NPLF loans include YWCA of Southern Arizona, Southwest Folklife Alliance, Esperanza En Escalante, Tucson Botanical Gardens and International Sonoran Desert Alliance. Loans range from $10,000 to $200,000 for up to five years.
NPLF’s liquidity is funded by a variety of investors which lend money to NPLF for a term of up to 10 years. Those investors include public agencies, nonprofits, individuals and several private foundations.
Investors receive two percent interest, while NPLF lends money out to local nonprofits at approximately eight percent. Since its inception, NPLF has grown its loan pool from $450,000 and three investors to nine investors and $850,000, with an additional $200,000 pending.
“This system is win-win,” says Don Jenks, Executive Vice President and Regional Credit Administrator for Bank of Tucson and NPLF board chair. “Investors make a return on their investment while also helping many wonderful nonprofit organizations make a difference in our community.”
Each loan recipient is thoroughly vetted, and the loan is structured to meet the unique needs of the recipient organization.
“With grant and donor funding, that capital is often restricted to certain uses,” said Jenks. “A NPLF loan gives the nonprofit the leeway to use the loan funds for general operations or other important priorities.”
For True Concord Voices & Orchestra, it was a cash flow issue that brought them to NPLF. In the fall of 2015, True Concord made its New York debut at Lincoln Center, a performance that hit number five on the Billboard charts. The performance was swiftly followed by a Grammy nomination for a composition performed on the group’s first internationally released album “Far in the Heavens.” While True Concord maintains a balanced budget, cash flow was not adequate to fund the travel requirements that arose from these honors. Fortunately, NPLF helped bridge the gap.
The NPLF board continues to recruit additional investors as well as collaborate with other lenders in Arizona to provide options for local nonprofits. Board members are also pursuing grants to expand the financial education programs NPLF offers to area nonprofits — education that will help them achieve long-term financial stability. Most recently, NPLF has applied for Community Development Financial Institution (CDFI) certification, which will provide access to federal funding and partnerships with local and national financial institutions. Our bank is proud to also provide some of the financial support for NPLF’s operations.
Launching NPLF was made possible through the joint efforts of the Community Foundation of Southern Arizona (CFSA), and Diamond Family Philanthropies.
For more information about NPLF, visit http://nonprofit-loans.org/
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Want the inside scoop on strategies to improve your chances of securing a business loan? At Bank of Tucson, we are always focused on how to help our clients succeed, so we’re happy to share our advice. Don Jenks, Executive Vice President at Bank of Tucson, has helped businesses throughout the Tucson area and beyond to secure loans and lines of credit, and he pulled together some valuable information to share with our clients and readers.
“If you’re looking to become bankable in the next year, open up a conversation with your banker now,” says Don. “Approach your banker with the right questions to find out how they look at cash flow, collateral and your unique risk elements. Even if they can’t lend you money now, they can at least define specific credit guidelines, providing you the tools to make your business bankable sooner.”
When you’re ready to walk in the door to seek funding for your growing business, make sure you’re prepared, he says. “Before you apply for funding, know your business inside and out and have a roadmap of where your business is going – financially and strategically. Know what you want so that you can express your vision to your banker before you apply for a loan or line of credit.”
Think of your banker as a consulting partner for your business. “We want to build a relationship in which you can openly discuss your strategic plan and seek advice from your banker about how to get there,” says Don.
That familiarity and understanding is critically important when you’re ready to apply for credit.
“If you are not an existing client, we’ll sit down with you to talk about your business so that we have a better understanding of your company and your objectives,” Don says. “That will help us when we do our preliminary review of your loan request. We’ll also talk with you about the kinds of financial products and services you currently use and how you can get the most value from your relationship with Bank of Tucson. Before finalizing our evaluation of your loan package, we will schedule a site visit to even better understand your business.”
For both new and established clients, when it’s time to submit a loan application, Don says be sure to include the following:
- Biographies/resumes of the owner(s)
- Ownership structure
- A discussion of management succession
- A discussion of business strategy and marketing strategy
- A discussion about suppliers and supplier risk
- A brief analysis of the competition
- Sales or customer concentrations
- A clear outline of your financing needs
- Three years of tax returns or CPA-prepared financial statements and a recent interim financial statement
- Three months of bank statements
- Accounts payables and account receivables – current and aging
- Three years of projections
- Disclosure of any government regulatory exposure
- Entity documents (Articles of Incorporation, partnership agreements, etc.)
Make sure your financial statements, including your balance sheet, are detailed. “You don’t want to present your banker with financials that look like a smile with missing teeth,” cautions Don.
Keep in mind also, the best business banking partners can offer resources, experience and connections for your business that are often just as valuable as the money they lend.