Lending to nonprofits: Considerations for credit analysis
U.S. nonprofits are growing in number, revenue and assets, according to the most recent data available on this important segment of the economy. Financial institutions considering lending to nonprofits may want to be aware of these recent financial trends, as well as some of the ways lending to these organizations might differ from lending to for-profit businesses.
According to the Urban Institute’s “Nonprofit Sector in Brief 2015,” the number of nonprofits registered with the Internal Revenue Service increased by about 3,000 a year between 2003 and 2013. Religious congregations and organizations generating less than $50,000 in annual revenue aren’t required to register, however, so the total number of nonprofits is unknown, according to the report.
Finances related to U.S. nonprofits are also opaque, considering only a small percentage is required to file some version of Form 990, the return for organizations exempt from income tax. Based on filings with the IRS, however, reporting nonprofits’ revenues and assets grew more quickly between 2012 and 2013 than did their expenses, the Urban Institute said. Revenues increased 3 percent to $2.26 trillion; assets rose 5.2 percent to $5.17 trillion, and expenses grew 1.7 percent to $2.10 trillion.continue reading »