Can a Nonprofit Get a Merchant Cash Advance?
Rarely. Most funders don't offer merchant cash advances to nonprofits, because an advance is a purchase of future sales and donations and grants don't behave like sales. Nonprofits with steady earned revenue, like program fees or a store, sometimes find options.
Why do most funders pass on nonprofits?
A merchant cash advance works because the business sells something and the funder takes a share of those sales. Donations are voluntary, grants come in lumps with strings attached and neither is a sale a funder can buy. Nonprofits also have boards and governing documents that limit what the organization can sign and pledge, which complicates the contract and the guarantee.
What if the nonprofit has earned revenue?
Some nonprofits run businesses: a thrift store, a café, a training program with tuition, a facility rented to the public. That income looks like sales on a bank statement, and a funder can read it. A handful of funders will consider these files, usually with the earned revenue as the basis and with board approval documented.
Why is the guarantee a problem?
Most advances include a personal guarantee from the owners. A nonprofit has no owners, and few board members or executive directors will personally guarantee the organization's obligations. That alone rules out many funders. Those that do consider nonprofits usually rely on the organization's own track record instead.
What other paths are worth a look?
- A line of credit through a bank or credit union that serves nonprofits.
- Grant bridge financing, where a known grant is the basis.
- Program related investments or loans from foundations and community development funds.
- Invoice based funding, if the nonprofit bills agencies for services.
What should a nonprofit have ready?
If you want us to look anyway, gather the organization's bank statements, a breakdown of earned versus contributed revenue, the board resolution authorizing financing and the most recent annual filing.
What about fiscal sponsors and related entities?
Some nonprofits run earned revenue through a separate for profit subsidiary. That subsidiary is a business in its own right, with its own account, and funders read it like any other company. If your organization has one, it opens far more options than the nonprofit itself.
Does the board need to approve it?
Whatever option you pursue, get the board's approval in writing before you sign. Funders and banks both ask for it, and it protects the people signing on the organization's behalf.
So can a nonprofit get an MCA?
If an advance isn't right for your organization, we'll tell you on the first call rather than shopping a file that won't fund.
How can Afterfirst help with this?
Call 877-FUND-654 and tell us how the organization earns its money. If a funder in our network considers your type of nonprofit, we'll tell you. If an advance isn't the right tool, we'll say so and point you to the kind of option that fits better.
What else do owners ask about this?
- Why do funders turn down certain industries?
- Can a franchise owner get a merchant cash advance?
- Can a home based business get a merchant cash advance?
More short answers on this topic are on the your business and your file FAQ, and the funder fit checker runs the numbers for your own file.
Have a question we didn't answer?
Ask us on the call. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.