From the Chronicle of Philanthropy: Why Some Foundations Are Lending, Not Just Giving

When Stephanie Beasley of the Chronicle of Philanthropy took a look at the research brief I prepared on philanthropic foundations using non-grant capital, she was as surprised as I was at the results: just 115 foundations using non-grant capital (alongside grants) on a repeated basis.

She asked me my thoughts on why this number wasn’t higher. I told her that donors are starting to think differently about new forms of funding, especially as budgets become tighter and a need for increased funds is rampant across the impact ecosystem when other funds are cut. But donors are simply not completely ready.

Some limiting factors include operational structure, leadership buy-in, a full picture of whether grantees are ready for this type of investment, lack of technical understanding of non-grant capital and more.

Some of what I shared with Stephanie was included in her article, “Why Some Foundations Are Lending, Not Just Giving.”

It was interesting to see the examples Stephanie gave around funders trying new and creative approaches to non-grant funding, including loans, equity stakes, credits towards existing debt and more. While my focus is more international in scope, understanding how U.S. community organizations are benefiting from different types of funding, helped me understand what options are out there. In fact there are many more to consider, as I highlight in this collection of different non-grant products.

For example, a donor I spoke to last week shared an example of a subsidy program they were rolling out with a fee for service type model that a nonprofit was testing. The donor was helping the nonprofit pay for certain operational expenses outright on a credit-based system. Creativity for the win!

Using non-grant capital doesn’t have to be scary, or too “invest-y”. But what it should be based on is what your partners could use, or are asking for.

I’d love to hear your thoughts on the article. Does this resonate with the work you are leading right now?