January 24, 2009
Credit Crisis Still Getting Worse for Nonprofits
The New York Times reports that the credit crisis is tightnening around the necks of charities. No doubt, the noose has already killed off many of the smaller charities that fly under the radar of big media. Here is an excerpt:
SCO is one of hundreds of charities caught in the credit crunch as skittish banks reduce their lines of credit or cut them off entirely at a time when the need for their services is climbing sharply, nonprofit leaders say. “While nonprofits are working feverishly to accommodate increased demand, they are facing severe financial constraints that are threatening their ability to go on, much less expand their services,” said Diana Aviv, president and chief executive of Independent Sector, a nonprofit trade association. Almost three-quarters of nonprofits in the United States receive some type of government financing, according to new research by the School of Social Service Administration at the University of Chicago, and about half of those count on that aid for at least half of their budgets. As a growing number of states delay payment, nonprofits must rely on lines of credit to help them get by. In Illinois, the state is running as much as 150 days late in making reimbursements, and California has told nonprofits to expect i.o.u.’s in lieu of payment starting next month. You can just imagine a nonprofit walking into a bank with this tattered envelope from Sacramento saying that some day the state government will pay it,” said Thomas Peters, chief executive of the Marin Community Foundation in Marin County, Calif. “How’s a bank to make a loan against that promise?” The Marin foundation has been providing emergency and short-term grants to keep organizations like SCO alive, but Mr. Peters said it could not meet the demand for such money. Independent Sector has asked Congress to have the federal government make payments for social services directly to nonprofits, rather than funneling the money through state governments, as is the current practice. It is also seeking a $15 billion bridge loan program for nonprofits that can no longer tap banks for short-term loans.
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