Access to Capital at Enterprise Level

To grow and be sustainable, nonprofit mission-focused owners will need access to additional equity, quasi-equity and debt at the enterprise (or “parent”) level of the organization. Historically, most funding for nonprofit affordable housing developers and owners occurs at the program or the project level and is in the form of debt.

Yet, it is at the enterprise level where the expenses are incurred to run these programs or develop these projects. While experience in the for-profit sector suggests that most successful businesses are built on equity, nonprofits are severely limited in their ability to raise enterprise level debt for their organizations. As of first step to achieve this objective, representatives from a number of socially motivated lending institutions have formed a Lender Working Group. We anticipate that subsequently STRENGTH MATTERS^TM will explore new sources of equity for CDRIs to capture the new thinking that is emerging in the social capital sector.

Lender Working Group
Members of the Lender Working Group are collaborating to identify key financial and non-financial performance indicators used by their institutions when underwriting CDRIs for enterprise level debt and equity. They will also consider how to streamline the application process and back-end monitoring for these borrowers. The development of a streamlined application and monitoring process combined with a clear analytical framework will help attract capital from non-traditional investors to this industry.
Recommendations from the Lender Working Group will be shared with the CFO Working Group and the Performance Benchmarking Working Group as well as other types of capital providers (i.e., commercial banks and pension funds) for further input and to build an industry consensus on best practices for evaluating CDRIs. The work of this group will lay the framework to demonstrate to investors and funders that the risk in lending to these organizations at the enterprise level can be quantified and mitigated through sound underwriting and monitoring practices.