Responding to the economic crisis

Kathleen Enright
Kathleen Enright

Kathleen Enright

Available financial resources have always been out of scale with issues that foundations and nonprofits exist to address.

That disparity will become only more obvious in the months ahead.

Funders are feeling tension between their long-term commitments and the near-term needs that are emerging as a result of the failing economy.

Nonprofits and those they serve are incredibly vulnerable with demand for services spiking at the same time that access to capital is in sharp decline.

But in crisis comes opportunity. Grantmakers and nonprofits alike are going to need to adjust to these changed times.

In the face of this economic crisis, Grantmakers for Effective Organizations has encouraged its member foundations to consider holding grantmaking steady in 2009, even though it will require them to pay out a larger percentage of their assets.

Many have committed to doing just, and others see this as the right time to give more and are increasing their grantmaking. 

Many foundations have seen a 30 percent drop in their assets, so it’s is clear that there will be less money to go around.

However, nonprofit executives should feel comfortable asking their current funders for different forms of help in addressing the challenges they face.

Get creative about current grants

Nonprofits should consider asking existing funders to release restrictions on current grants to give them the flexibility to adapt more rapidly to a changing economy and new presidential administration.

Many grantmakers are open to considering this possibility. It’s a no-cost, high-impact change they can make.

Recognizing the extraordinary times we’re facing, for example, the S.H. Cowell Foundation in California proactively removed the matching requirement for its current grants without waiting for specific grantees to ask.

Consider other forms of financing

Would a nonprofit benefit from a cash-flow loan or access to credit? Some foundations already offer cash-flow loans and access to credit along with conventional grants.

Those who do are seeing a spike in demand: Applications for cash-flow loans from the Washington, D.C.-based Meyer Foundation, for example, have tripled in recent months.

And other funders are willing to consider these more creative financing opportunities, especially if it’s clear to them there’s a need.

The Tony R. Wells Foundation in Ohio finds offering lines of credit to nonprofits in their area to be a win-win.

It can offer nonprofits cheaper interest rates than banks provide, but a higher interest rate than the foundation would generate from buying treasury bills.

The foundation has also offered to buy up nonprofit loans that are about to go into default in order to negotiate manageable repayment terms.

Explore pro-bono services

Nonprofits have long benefitted from the skills and time of dedicated volunteers, but an emerging group of companies and foundations are getting more sophisticated about deploying human assets to benefit community organizations.

The Taproot Foundation, for example, makes grants of high-quality, professional consulting services.

The foundation pulls talent from top consulting firms and provides them with high-quality training in the details of nonprofits before sending them to a client.

In a time when cash is in short supply, alternative forms of support can fill important needs.

Kathleen Enright is president and CEO of Grantmakers for Effective Organizations, a coalition of foundations and other grantmakers committed to helping nonprofits achieve the broadest possible results.

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