Program-Related Investments and Loans (PRIs)

Description

  • Program-related investments (PRIs) and loans for nonprofit organizations are usually made at-the-market, below-market, or interest-free, or they can take the form of a loan guarantee or letter of credit. PRIs are most often made by grantmaking institutions. Loans, on the other hand, can be made by private institutions, such as a bank, etc., and are usually made at the market rate.

Timing

  • PRIs and loans offer working capital, a way to finance daily operations or future growth. This type of funding can be woven into an overall grants portfolio to help grow your organization.

  • PRIs and loans are a good funding source for acquisitions and construction. Timewise, it can be very helpful to secure this type of support at the end of a capital campaign to meet your goal.

  • PRIs and loans can be used for bridge funding, covering costs, and to begin facilities projects while awaiting payment of government or foundation grants or capital campaign revenue.

Prepare

  • PRIs are like grants in that funders use them to give money for charitable activities. But there is a significant difference. When foundations give PRIs, they expect to get the money back by a specified time, usually at below-market interest. That means your application needs to have a payment schedule included, and a source for paying back those funds.

  • Learning how to smartly use PRIs and loans to leverage other funds is the hallmark of a savvy director of development. Use these resources when/as you need them.

  • PRIs range in size from as little as $1,000 to several million dollars. Generally, the amount of the PRI depends on the need and capacity of the recipient as well as the scope and size of the funder, and the funder’s tolerance for risk.

  • The duration of the PRI can stretch from a few weeks to five or even ten years. For example, a foundation may establish a revolving fund to provide short-term bridge payments that need to be repaid within a few weeks. Conversely, PRIs may be used to support a multi-year community development project or fund a new business that requires long-term capital.

Find

  • Consider checking out the Nonprofit Finance Fund. The Fund provides loans to nonprofits throughout the U.S. However, there is a minimum loan size ($500,000) and a minimum operating budget size ($3 million).

  • If you can’t find a foundation that makes PRIs (which would be the first choice), then consider talking with your local or regional bank to see if they consider providing below-market loans for nonprofits.

  • Go to our Charitable Giving database for the U.S. or Canada and use the Type of Support filter to select “Loans/PRIs.”

  • You can also contact your local or regional economic development council to see if they have additional information about potential loans.

Apply

  • PRI applications are not complicated. However, you will need certain attachments such as tax status, certified articles of incorporation and bylaws, certified borrowing resolutions from the board of directors, corporate “in good standing” certificates, etc.

  • Carefully review the application criteria for PRIs or loans, as some funders have a minimum and maximum loan amount tied to the applicant organization’s operating budget.

Manage

  • Management of PRIs and loans is relatively easy, as they are simply like any bank loan or house mortgage: you make the payments on time. No other reporting is required.