A Crazy Idea?

While everyone is thinking and worrying about the economic crisis and the potential detrimental effects on the nonprofit sector, an idea occurs to me.  With the continuing volatility in the stock market and a dark economic forecast at least for the next few months, perhaps the next year, foundations and individuals won’t make money on their investments in the market.  What if a foundation took say $100,000 from their corpus and made a program-related investment (PRI) in a nonprofit hoping to build their capacity to raise unrestricted dollars.  A PRI is basically a loan to a nonprofit at low interest rates.

What if a foundation, or a wealthy individual, loaned a nonprofit $100K+ for a 2-3 year term.  Then, the nonprofit could use that capital to invest in their fundraising infrastructure in order to diversify and be more strategic in raising unrestricted dollars.  They could hire a seasoned Development Director, purchase a new donor database, upgrade their website and email marketing efforts, launch a major gifts campaign, train their board, and so on.  The idea is that all of these investments would pay for themselves in 2 or 3 years, at which time the nonprofit could pay back the individual or the foundation.

We did something like this at KLRU, however it wasn’t with PRIs, but with donor investments, which in a market like this might be harder to come by.  With investments from a handful of donors totaling $350K we completely revamped our fundraising function and increased annual revenue by $1.6 million, a 40% increase.  That’s a pretty amazing ROI.  And donors loved it.

If you applied this idea to PRIs, donors could help nonprofits increase their capacity and sustainability, while the donor protects his corpus in a down market.

Just a thought.

Tags: Foundations, Funding, PRIs