Is a Micro Loan What Your Non-Profit Business Needs?

Is a Micro Loan What Your Non-Profit Business Needs?

Unlike traditional small businesses, if yours is a nonprofit, you will have some different challenges to face as you get started. Especially when it comes to getting loans and/or funding, lenders are a little less forthcoming with money, as your endeavor may not be profitable for a while.

Fortunately, there are nonprofit lenders out there who specialize in helping mission-based businesses get off the ground. So if you are denied by a traditional lender, there are avenues that you can explore to get the money you need.

Microlending: Is This the Right Choice?

Banks weigh the risk. And with a newer not for profit organization, the risks can be pretty significant. Even a credit union may shy from lending you money given your company's objectives. Microlending, a relatively new option, can be of great help to nonprofit companies looking to secure financing for whatever the project might be.

What a microlender does essentially is to provide low risk, smaller loans to community organizations and businesses that may need some help with various aspects of funding. Keep in mind, these loans are on the lower value side—with the national average around 13k.

But, the good news is that interest rates on these loans are low, sometimes you can even find a zero percent microloan. And if you are a relatively new company, they don't hold that against you. Even things like credit score and collateral are more flexible when applying for a microloan (the value of which is generally less than 50k/).

Such nonprofit lenders will also offer services and/or classes to nonprofits that are just starting out or that have been operating for a while to include: mentoring networking, leadership development, and other such workshops.

Should you seek out a nonprofit lender with whom to work?

If yours is a business that is more along the traditional definition of a company, then a nonprofit lender probably isn't the best choice for you, as they specialize in helping community-driven organizations. For example, soup kitchens and youth programs may opt to enlist the aid of a nonprofit lender.

And again, the loan values tend to be lower. So if you need less than 50k and it is more of a short to medium term need, and you are a mission-based business, then this may be a great route to explore. Even if it is just to get through a slower time and thus keep your organization running.

Different Types of Nonprofit Lenders

There are a few different approaches to this type of lending. Perhaps you've heard of crowdfunding which has become increasingly popular. There are also community development financial institutions (CDFI/) which work with lower income businesses.


Platforms such as Kickstarter, Indiegogo and GoFundMe represent the ways in which the internet can bring people together to help others. Peer to peer giving has become quite common as of late. This, in turn, inspired the rise of peer to peer lending. In England last year, in excess of 2 billion pounds was lent via peer to peer lending.

Essentially what happens is that lenders can raise money through online platforms. This can be done by accessing investors, donors, even just members of the community. However, you are not giving up a percentage of your company in raising the funds.


This is backed by the US Treasury. Its purpose is to help mission-based companies get the money they need. You would apply to a lender who works with CDFI loans. Additionally, the lender may provide credit counseling and other such services.

Nonprofit Lending and the Underwriting Process

With nonprofit lenders, it isn't about the credit scores, or annual revenue, or how much collateral you may have. Rather, they are more apt to evaluate your application based on social standing. This is what is known as social underwriting. Gone are the traditional standards which you would otherwise have to satisfy. Which means, this is a huge boon for nonprofit companies.

So what goes into the social underwriting process exactly? First off, they may have you provide references from within the community which you serve. They could ask for as many as 20-25 such references. Basically, the goal is to ensure that the community in question does, in fact, support you and your mission.

Unlike with traditional lenders' criteria, the social underwriting technique simply wants to understand your creditworthiness via the reputation you have among your peers and those community members you may be serving.

Some of the More Prominent Nonprofit Lending Institutions

In searching for a nonprofit lender you want to make sure of their reputation. More and more are taking to advertising their services online, which could make finding a reputable institution a little tricky. Below are a few of the best nonprofit lenders we've researched.

Accion International

Based in Cambridge, Massachusetts, Accion got its start back in 1961. Their mission is to get funding to companies and individuals in an effort to help promote and strengthen important causes. The action is actually a CDFI and they have had a huge impact when it comes to the microloan industry.

SCORE Foundation

SCORE is run largely by volunteers. Their goal is to help mission-based organizations and other such small businesses. They provide financial solutions and short term microloans to those who get approved.

Association for Enterprise Opportunity (AEO/)

AEO seeks to revitalize the small business, specifically those Main Street businesses that seem to be closing shop one after another. They manage what is known as the TILT Forward Network—bringing together lenders and small mission-oriented businesses as well as minority-owned businesses.

Is This the Right Solution?

More and more nonprofit lenders are not being seen as a last resort but rather a truly viable option for nonprofit companies and organizations who need money. Especially those organizations that are trying to revitalize a community—a microloan via a nonprofit lender may be the perfect solution! They offer competitive rates and very flexible terms in some instances. Plus, with their social underwriting approach, you don't have to have the best FICO or a ton of collateral to put down.

Becky: Hi! Let's find the best loan option for you

Google 4.8 star rating
Trustpilot 4.6 star rating

First Union Lending LLC is a dually licensed Lender/Broker with its main offices located at 4900 Millenia Blvd First Floor Orlando, FL 32839. First Union Lending LLC and its ads are meant for continental United States, including Alaska and Hawaii small business owners. Business Loans offered by First Union Lending LLC have varying rates and terms that can range from 30 - 120 payments and all rates and terms are based on eligibility of the business and its owners. The actual terms are based on credit, business history, industry, amount and terms. As an example, a $5,000 loan paid over 5 years at 8% would have a total repayment of $6,082.92 over the life of the loan. We use the latest encryption to protect sensitive information transmitted online, as well as run our own secure server network to ensure your information is protected offline as well. California loans made pursuant to the California Financing Law, Division 9 (commencing with Section 22000) of the Finance Code. All such loans made through VBJ Consulting, LLC, a licensed finance lender/broker, California Financing Law License No. CFL#60DBO78163

Copyright © First Union Lending, LLC. 2023