Catherine Gill

Improving Nonprofits’ Financial Health

The Nonprofit Finance Fund (NFF), whose New England office is located in TSNE’s NonProfit Center, is a national leader in financing nonprofits, strengthening organizations’ financial health and improving their capacity to serve their communities. With NFF’s help, nonprofits build and renovate facilities, fund growth needs, and expand and sustain operations over time.

Creating Financial Viability

Several years ago, NFF launched a new division, NFF Capital Partners. The new undertaking is a perfect example of how the organization is helping fellow nonprofits secure their own future in order to improve that of their constituents.

According to Catherine Gill, director of NFF Capital Partners, the theory here isn’t so different from what takes place in the for-profit sector, in which venture capitalists and others invest in the growth of companies in return for future profits. In developing NFF Capital Partners, NFF asked, What if the “profits” from a company’s success weren’t financial but rather social? In essence, NFF Capital Partners works with nonprofits to raise equity, and hopes that through this work, it can create a new asset class for the nonprofit sector.

Traditionally, donors expect their funds to be funneled into direct service. For example, a donor making a $100 to support relief efforts in Rwanda has the expectation that those funds will be used in very large part to buy food or medicine. But, what if instead, those funds went toward building out the “machinery” of an organization so that it could sustainably provide those relief services?

As Gill puts it, “If you have something that’s proven to be of value in the social marketplace, the nonprofit equity investor asks, How can I help you provide those services?”

Building the Infrastructure

With Capital Partners, a nonprofit works to build capital and develop a high level of reliable revenue growth. Equity stakeholders – benevolent lenders – provide funds up front, so that nonprofits can take the time to build the necessary infrastructure and capacity to allow nonprofits carry out their work year after year.

The product through which NFF Capital Partners seeks to accomplish its mission of closing the equity gap for nonprofits, is the SEGUE – the Sustainable Enhancement Grant. The SEGUE is a set of terms, spelled out in a contract, that is shared among a syndicated group of investors and the nonprofit they support.

These terms, which include a strategic business plan, an accounting treatment, and regular reports on progress and use of funds, track the use of capital towards progress for both the investors and the nonprofit. Using the SEGUE, NFF Capital Partners helps nonprofits structure capital campaigns of between $5 and 30 million.

Sustaining the Mission

According to NFF, the SEGUE methodology makes it easier to see how the successful execution of a nonprofit business plan also leads to a permanent thing of clear and enduring value: a strong, dependable mission-driven institution that improves people’s lives, year in and year out.

NonProfit Center
Tenant Spotlights

• Komen for the Cure
• Chefs Collaborative
• South Africa Partners
• Boston Pride Committee
• Easter Seals Technology and Training Center
• World Society for the Protection of Animals
• Nonprofit Finance Fund
• VSA arts of Massachusetts
• Disability Rights Fund
• Nonprofit Voter Engagement Network

By being able to build equity, a nonprofit can take the time to learn and grow and attract long-term revenue streams. Without it, a nonprofit may find itself spending its energy on fundraising and staying afloat. Lack of equity can also mean that a nonprofit scrambles to accept a grant that is off-mission, worrying that a funder’s priorities are not the same as its own. At the end of the SEGUE process, the organization should be self-sustaining and in line with its mission.

An example of a local nonprofit that has used the SEGUE approach to great success is Year Up, which raised $18 million to fund its growth needs. According to Gerald Chertavian, CEO of Year Up, “NFF has been crucial for Year Up’s Growth Capital Campaign in helping guide how we can raise the capital to build a financially sustainable organization in the long term. Their clarity of thought and support throughout this process has been invaluable.”

A Great Partnership

The NonProfit Center is excited to house such groundbreaking work. Reshaping the nonprofit landscape towards sustainability requires social change on several levels – social change the center fully supports.

The NonProfit Center is pleased that it has been able to contribute to the sustainability of Nonprofit Finance Fund in a small way. Originally leasing space on the first floor, NFF has been able to expand its staff, given the predictable, affordable rent at the NPC, and moved to a larger space in 2007.

Excited to be part of the center community, the Nonprofit Finance Fund brings a skill set vital to the nonprofits around them. This past spring the staff hosted workshops on the new IRS form 990, for instance, and next spring will be leading a workshop on nonprofit financial literacy as part of TSNE’s Capacity Building Training Series at the NonProfit Center.

Learn more about other NonProfit Center tenant organizations by visiting Our Tenants and Tenant Spotlight sections.