Community foundation launches loan program

Line of Credit Guarantee designed to ease burden on midsize to large nonprofits in Ottawa County.
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Applications are due April 24 for a new loan opportunity for nonprofits in Ottawa County.

The Community Foundation of the Holland/Zeeland Area (CFHZ) on April 10 announced it is launching a Line of Credit Guarantee Program that allows nonprofits in the greater Holland/Zeeland area with a 2019 operating budget of $500,000 or more to apply for a CFHZ guaranteed line of credit established through West Michigan Community Bank (WMCB).

Nonprofits do not need to be existing customers of WMCB to qualify, and the LOC guarantee from CFHZ is structured so nonprofits will not need to go through the traditional underwriting process or use their own collateral for a line of credit or loan.

The Line of Credit Guarantee Program has a total cap of $2 million, with a limit of up to $100,000 for organizations with 2019 budgets of $500,000 to $1 million and $200,000 for organizations with 2019 budgets of $1 million or more.

CFHZ anticipates being able to help about 10-15 nonprofits through the program out of around 50-60 midsize to large nonprofits in the greater Holland/Zeeland area.

Mike Goorhouse, president and CEO of CFHZ, said the community foundation got to work setting up this opportunity the week of Gov. Whitmer’s “Stay Home, Stay Safe” order and launched it within about two weeks.

“I don’t know if any of us anticipated this unique combination of deep public health, economic and basic needs issues arising so quickly all at the same time and with no sense of how long the challenges will last,” he said. “The community foundation is doing (its) best to analyze the constantly changing environment so that we can best deploy our resources to make the most impact possible.”

Goorhouse said the LOC program came about as the community foundation began seeing nonprofits having to cancel their spring fundraisers and close down their resale stores. Many organizations use those two as their most significant revenue streams.

“People were like, ‘My spring fundraiser (generates) $150,000 and the resale store is $40,000 a month toward my operating debt, and it’s just — poof! — gone in midair while the needs are also rising,’” Goorhouse said.

The community foundation’s response was twofold: First, it joined a response coalition with Greater Ottawa County United Way and the Grand Haven Area Community Foundation to create a $600,000 fund for the basic needs of “keeping people fed, housed and healthy” — of which about $500,000 had been distributed as of press time.

Secondly, CFHZ decided to do the LOC program to help nonprofits sustain their operating funds.

Applications will be reviewed by a joint taskforce of CFHZ Distribution Committee and Program Related Investment (PRI) Committee members with support from CFHZ staff.

The taskforce will consider three main factors when selecting nonprofits to receive the LOC, Goorhouse said: how they have been impacted financially by COVID-19, whether the nonprofit was financially healthy before the crisis, and the general impact and capacity of the organization.

“We know our local nonprofits really well, but they have a chance to make their case and tell their story about the work that they do and the impact they have on the community and why it’s important that their mission stays alive and healthy and well,” Goorhouse said.

Leslie Brown, board chair of the CFHZ and chairperson of Metal Flow Corporation, said the LOC “is a combination of the ability for us to utilize the flexible assets of the community’s endowment to respond to the changing needs of our community and the ingenuity of CFHZ to provide innovative solutions to serve our community in its time of need.”

Added Goorhouse: “Our goal is to hopefully not lose too much nonprofit capacity during this crisis so we can come out the other side and still have strong nonprofits.”

Additional specifications of the Line of Credit Guarantee Program through WMCB:

  • It is a three-year, interest-only LOC, meaning the nonprofit only has to pay interest during the three-year term, but the full amount of principal and interest must be paid off by the nonprofit by the end of the third year.
  • The LOC has a floating interest rate of the current prime rate with a floor of 4%. This means the interest rate will be 4% unless the prime interest rate goes above 4% (it is currently at 3.25%).
  • WMCB has waived all loan origination and closing fees.
  • The nonprofit can draw on the LOC throughout the first two years, but the third year of the LOC is for repayment only.
  • The dollars from the LOC can be used for any operational expenses but cannot be used for capital-related expenses, such as facility improvement. Applicants should check with CFHZ if they are unsure if a specific expense is considered a capital expense.
  • In addition to guaranteeing the LOC, CFHZ will provide reimbursement to the nonprofit for all interest the nonprofit has paid on the LOC during the first two years, up to 4% per year. During the third year the LOC is open, CFHZ will not reimburse interest costs paid by the nonprofit.

Applications are due Friday, April 24. Goorhouse said this is not meant to limit applications; it is the foundation’s attempt to get the lines of credit established quickly to provide the greatest possible benefit to participating organizations.

Full eligibility guidelines and details for how to apply are at cfhz.org/lineofcredit.

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