Year-end Planning with LENDonate
As 2024 draws to a close, it’s an ideal time to evaluate your investments and charitable giving and implement strategies to optimize your investment portfolio and wealth planning. Year-end planning can help reduce your tax liability, realign your portfolio with your investment goals, and maximize your impact in the new year. Here are three ways to integrate LENDonate into your year-end planning.
Reduce Your Tax Liability
If you are a current lender on LENDonate, converting all or a portion of your investment into a donation can maximize the impact you have on that organization while providing you with a potential tax deduction.
As always, consult your tax advisor to see if this strategy aligns with your current tax situation. This can be done by the click of a button on your investment dashboard without needing to transfer any funds.
Realign your portfolio with your investment goals
Year-end is a great time to evaluate your investment portfolio’s overall performance and ensure it still aligns with your investment goals. Many investors use this time to rebalance their portfolio back to a target asset allocation or adjust their overall asset allocation to take advantage of new opportunities or goals. By funding loans to nonprofits, accredited investors make private debt investments which can complement existing fixed income investments and/or expand their portfolio to include alternative investments.
LENDonate’s high impact private debt loans offer attractive risk and return characteristics such as:
- High yield: Potential to generate greater income
- Low volatility: Price not tied to interest rate fluctuations
- Diversification: Low correlation with traditional asset classes
Increase the impact of your investments
Creating impact does not need to be limited to your charitable giving. As you look forward to next year, consider how the investments across your portfolio align with your personal goals. For some investors this may mean shifting more of their “traditional” investments to ones that create positive social and financial returns. Nonprofits are the unsung heroes in our communities and are often overlooked by mainstream financial services. By partnering with LENDonate to fund loans to nonprofits, you help create direct and measurable impact that is aligned with your personal values.
Final Thoughts
We’re working to transform how investors mobilize capital for the public good. To learn more about our current investments and how to partner with us, please visit www.lendonate.com.
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LENDonate is All About Nonprofit Financing
LENDonate’s mission is to create a dynamic market that allows capital to flow more freely in the nonprofit sector. We harness the power of nonprofit networks – a desire to contribute to social good – onto one single platform. This platform facilitates desired philanthropic actions, from offering grants and donations to making market-rate capital accessible to qualified projects. See Borrowers FAQ for more details.
The Fed Just Lowered Interest Rate: How Nonprofits Can Take Advantage of This Lower Interest Rate Environment
1. Expansion of Services and Reach
2. Facility Upgrades and Capital Improvements
3. Cash Flow Management
A Few Considerations
BONUS 4th Reason: Long-Term Savings
So is a loan right for your nonprofit?
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LENDonate is All About Nonprofit Financing
LENDonate’s mission is to create a dynamic market that allows capital to flow more freely in the nonprofit sector. We harness the power of nonprofit networks – a desire to contribute to social good – onto one single platform. This platform facilitates desired philanthropic actions, from offering grants and donations to making market-rate capital accessible to qualified projects. See Borrowers FAQ for more details.
How Do Nonprofits Repay Their Loans?
Nonprofits create critical impact in our communities and provide services – such as housing or medical care – that would otherwise be inaccessible. To deliver these services, nonprofits, like for-profit businesses, require capital. For some nonprofits, philanthropy delivers enough funds to fulfill missions. Others generate income to supplement donations and grants (think fees for medical services, or revenue from thrift stores as examples).
But nonprofits can still face a funding gap despite robust philanthropy and income generating services. This puts their missions in jeopardy or restricts their ability to grow their outreach and impact. So how do nonprofits find more capital? Like any business, they borrow.
The fact that nonprofits have loans may come as a surprise, but the landscape of nonprofit debt-financing is neither new nor small. In fact, according to the Federal Reserve, U.S. nonprofits held over $750 billion in financing as reported in the Q2 2023 Balance Sheet of Nonprofit Organizations. And because loan proceeds contribute directly to creating impact in communities, nonprofit lending can be a key part of an impact investing strategy.
Now that we know some reasons nonprofit borrow, let’s look at how they repay their loans and how impact-focused investors can transform their philanthropy into a nonprofit investment strategy.
How do nonprofits repay their loans?
Nonprofits rely on future revenue to repay their loans. In this respect, nonprofits are no different than small business borrowers. However, a nonprofit’s revenue sources – gifted (through donations and grants) and earned (through fees charged for services or through investments) – act differently than a for-profit business. Because donations and investment income are inconsistent and fluctuate, nonprofits at first glance look like riskier borrowers.
So how can a lender evaluate a nonprofit’s potential revenue stream? As with any borrower, they construct financial projections to understand what costs, revenue, debt balances and cash balances might be in future months. In evaluating a nonprofit’s financial strength, it’s important to consider:
• Committed revenue: Have grants been awarded, but the nonprofit is waiting on the funds? What donations have been formally pledged, but not yet received? These receivables can be easy to overlook but make a big impact on a nonprofit’s overall health.
• Net cashflow projections: Are capital campaign targets reasonable given past campaigns and the donor community? Are any grants likely to be renewed? History and strong qualitative factors such as the experience level of the board and the nonprofit’s leadership can help ground these assumptions.
Extending philanthropy with impact investing and nonprofits
Nonprofits and investing aren’t words that come naturally together. After all, nonprofits bring to mind charity and investments suggest profit. For impact investors, however, investing in nonprofit loans can be a key part of a double-bottom line strategy, creating both a positive financial outcome and positive change.
• Positive financial outcome: By providing the loan capital for a nonprofit, investors earn an interest rate. Upon successful repayment of the loan, investors receive back the principal they provided. This principal together with the earned interest can be upcycled into another nonprofit loan, magnifying the impact of the initial investment.
• Positive change: Nonprofits create impact every day in their communities and beyond. And unlike traditional businesses, nonprofits must reinvest all revenue back into the organization’s programs and activities.
Many impact investors already have philanthropic programs in place, supporting nonprofits through donations. Impact investors can also lend to nonprofits, offering a unique way to extend a philanthropic mission. At the loan’s conclusion, investors can forgive the loan, transforming both the principal and the interest earned into a larger donation.
Magnifying impact with LENDonate
At LENDonate, our mission is to create a new market that allows capital to flow more freely to nonprofits. By focusing on loans for creditworthy nonprofits, LENDonate
• Puts more resources in the hands of effective, visionary nonprofit leaders
• Connects impact investors with nonprofits, ultimately reducing their borrowing costs
On the LENDonate marketplace, impact investors bid on the loans of prescreened nonprofits, choosing to offer an interest rate at a LENDonate-determined ceiling rate or an investor-reduced rate. Impact investors can also give a donation or construct their bid as a combination of loan and donation.
During the life of the loan, LENDonate attributes monthly repayments back to each investor. At the conclusion of the loan, LENDonate can help recycle the funds to other causes or convert them into a donation.
The result is a win-win. Nonprofits receive funding from a wider community of supporters allowing them to grow their impact. And impact investors have access to wider range of investment opportunities that create true impact. It’s impact, magnified.
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LENDonate is All About Nonprofit Financing
LENDonate’s mission is to create a dynamic market that allows capital to flow more freely in the nonprofit sector. We harness the power of nonprofit networks – a desire to contribute to social good – onto one single platform. This platform facilitates desired philanthropic actions, from offering grants and donations to making market-rate capital accessible to qualified projects. See Borrowers FAQ for more details.