The Credit Crunch
You might have read about it as it pertains to for-profit, smaller businesses as they operate from a cash flow perspective. What's being said by business owners, and not refuted by banks, is that lending money is becoming tighter -- it's harder to get a loan which is used by many small businesses to help with cash flow--when there are more expenses than there is revenue, most of the time only based upon a delay in the revenue coming in.
So what does this have to do with nonprofits?
Nonprofits are businesses too. Consider your local food bank or shelter/housing or social service agency. They have payroll. They have rent. They have regular expenses. And much like a for-profit business, they're dependent on revenue such as when a donor sends in their philanthropic gift--makes payment. This leaves nonprofits in the same space in tighter lending as for-profit businesses to keep enough money on hand to pay expenses in a timely fashion.
Banks’ decisions on having a line of credit for this purpose are dependent on financial numbers. The problem is, we're reading more and more about these financial requirements being increased. It's almost like those with cash are being given credit lines when they really don't need them versus those who need them but can't get them. And how much “extra" money do you think nonprofits just have sitting around?
While not discussed in detail, I think there's a realistic chance we'll begin to read about nonprofits having cash flow problems. They can't get banks to give them a line of credit to hold them over until anticipated philanthropic dollars or grants come in. It's another reminder that while in a special category, with special purpose, nonprofits are businesses too. And the economic climate affects them much like it does their for-profit brethren.
