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Loans and Financing RFPs

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Loans and Financing RFPs

From an Ask-NCN Discussion 3/3/15

Katie Edwards, The Nonprofit Centers Network
I just got a question from The Sunflower Foundation, an NCN member who is in the process of starting up a nonprofit center. They are looking at their financing options, and have relationships with a few local banks. They would like do something like an RFP so that they can easily compare the terms of the offers that they receive. They would like to know:

• Has anyone done something similar and can you share your RFP as a sample?
• Has anyone used collateral for the loan other than the land itself (as a foundation, the Sunflower Foundation has the option of using its endowment or other assets to secure the loan)? What did you learn? What would you recommend?

 

David Schrayer, Mill One
I learned at the NCN event in Denver this fall that most groups don’t have debt financing, lucky them!

We don’t have an RFP per se. The banks will issue very similar term sheets so they should be easy to compare and the differences will prompt you to ask for clarification on certain items.

Re collateral: the best term for you as a borrower is a “non-recourse” loan in which the property alone acts as the collateral for the loan and whatever entity owns the property (assuming it is held by a related LLC and not the foundation itself) is on the hook for the loan. If this is a new center and there is no rent income history the non-recourse loan is highly unlikely. Beware of the extent to which your endowment becomes encumbered by the loan for the center. This is something that should be considered carefully by your CFO or finance committee.

I’d recommend starting by talking with the community development or loan officer that you’re most friendly with and getting the lay of the land before you start shopping around. They will be able to tell you what’s most likely given your situation. You can use that information to speak more coherently to other lenders. This will go a long way in showing how smart and thoughtful you are!

Here are some things that all lenders will want to know so will be good to have handy. Most will have some kind of intake form that you’ll need to fill out.

• Legal name of borrower (property owner)
• Block and lot, land area, zoning
• Description of building: construction type, # stories, types of uses
• Any recent appraisals done
• Survey
• Environmental information
• Names of tenants, square feet occupied
• Any deed restrictions
• Last year’s tax return for building
• Income and expense statement, last year and projected

 

Melissa Nochlin, Broad Street LLC
Contact Megan Devenport at Denver Shared Spaces- she will be a great help. Megan Devenport: megan@denversharedspaces.org