We’ve divided our frequently asked questions (FAQs) into the following five categories. If your question isn’t answered below please contact us for more information.
Q: What kind of organizations does NCCLF lend to?
A: We support organizations that benefit or provide services to low-income or underserved communities. We lend money to nonprofit organizations for affordable housing projects, human service programs, and community facilities. We also offer loans to worker-owned cooperatives.
Q: What type of information do you look at to underwrite a loan?
A: Typically, we require applicants to submit three years of financial statements, preferably audited. We also analyze your board and management’s qualifications and experience, your financial projections for the term of the proposed loan, and the details of the project you are proposing to finance. We ask for several program and credit references, and we perform due diligence regarding your organization’s credit and funding history as well as your organization’s program performance.
Q: Does NCCLF provide emergency financing?
A: No. Our underwriting process and credit review process does not allow for us to provide emergency financing.
Q: How long does the underwriting process take?
A: Our loan committee meets once a month to review credit recommendations. Depending on our work load, we require applications to be submitted from three to five weeks prior to loan committee. If you know you have an upcoming financing need, please contact us as soon as possible. We can help you put together a loan application, and can give you an application schedule based on your financing timeline.
Q: Do you offer long-term loans?
A: NCCLF has extended its loan terms from 5 years to 10 years, with up to 25 year amortization. We also offer flexible amortization schedules and can offer lower monthly payments. We work with borrowers who have balloon payments and good payment histories to refinance the payments, either with NCCLF or a commercial lending institution.
Q: My organization needs to borrow funds in an amount greater than NCCLF’s loan limit. Can NCCLF still help us?
A: Yes! NCCLF can partner with a variety of other lenders to package financing sufficient to meet loan requests greater than our loan limit of $2 million. NCCLF also frequently acts as a “gap lender” providing financing for the amount between what banks are willing to lend and the equity the borrower has. NCCLF can provide loans up to 90% loan-to-value, and on occasion can provide loans between 90-100% loan-to-value.
Q: My organization has government contracts, whose payments can be delayed as long as 90 to 120 days. Could we use an NCCLF line of credit to help us with our cash flow?
A: Yes! NCCLF’s line of credit is designed to help nonprofits that have cash flow problems due to delayed contract payments. Typically, we take a deed of trust on a property or an assignment of the contracts as a form of collateral.
Q: I’ve heard that the prime rate is very low. Do NCCLF’s interest rates reflect the low prime rate?
A: NCCLF’s interest rates are based on our cost of funds, which is dictated to us by our investors, and are not subject to the fluctuations (both positive and negative) in the prime rate.
Please note that this is neither an offer to sell nor a solicitation of an offer to buy. All prospective investors must review our prospectus dated November 12, 2006, which gives more complete information about the Fund and investor criteria. The California Department of Corporations requires that potential individual investors in the NCCLF satisfy certain financial criteria, which are listed in the prospectus.
Q: What do I need to do in order to invest in NCCLF?
A: Call or email us! We’ll send you a packet of information that includes complete information about the Loan Fund, our activities, and everything you need to start an investment with us. All investors in the Fund must meet certain financial criteria as set forth in the Prospectus that is sent to each investor.
Q: Where does NCCLF’s investment capital come from?
A: We hold investments from individuals, foundations, religious communities and financial institutions. We also raise permanent loan capital in order to increase our financial stability, maintain an extra cushion against potential loan losses, increase our risk tolerance and lending flexibility, and meet the equity requirements of our largest institutional investors.
Q: What interest does an investment in NCCLF pay?
A: For investments less than $20,000 at terms of 1 – 3 years, we offer rates of 0% – 2%. For investments that are $20,000 or more or that are 4 – 10 years, we offer rates of 0% – 2.5%. For investments that are $20,000 or more and that are 4 – 10 years, we offer rates of 0% – 3.75%.
Q: Are NCCLF investments FDIC insured?
A: No. However, to date, not one NCCLF investor has lost an investment, and since 1987 we have closed $91.7 million in loans to 290 projects with a cumulative loss of 1.22% since inception.
Q: Is the interest on investments in NCCLF tax-deductible?
A: No. But contributions are! Many of our investors help support our operations by also making yearly tax-deductible donations.
Q: When does NCCLF pay interest on its investments?
We pay interest annually on December 31.
Q: How does NCCLF get the money it needs to support its programs?
A: NCCLF earns income for the lending and technical assistance programs we provide to our nonprofit clients. However, because this earned income is not enough to cover our operating expenses, we raise grant and donation money from individuals, foundations and corporations.
Q: How can I find out about donating to NCCLF?
A: Call us, write us, send us an email, or just drop a check in the mail. We’d be more than happy to talk to you about how your donation will help us make loans to nonprofit organizations in low-income communities.
Financial Consulting Group
Q: What is Financial Consulting?
A: Financial Consulting is a technical assistance program that provides financial management training and advice to nonprofit organizations.
Q: Who qualifies for Financial Consulting?
A: Any community-based nonprofit located in the Northern California region qualifies.
Q: How does the Financial Consulting program work?
A: NCCLF evaluates your organization’s financial position and financial management capability. After the initial evaluation, we provide outside resources and, in many cases, work directly with your organization to develop a work plan that addresses your organization’s financial needs.
Q: What are some components of a financially fit organization?
A: A fiscally fit organization should have:
- A budget (a way to plan, track, and control income and expenses)
- Financial statements (a balance sheet, income statement, statement of functional expense and cash flow statement)
- An audit (independent review of the organization’s financial position)
- Cash flow forecasting (prediction of how and when cash moves in and out of an organization)
- A positive net income (where the organization earns more money than it spends in a given period)
- A positive cash flow (where the organization receives more cash than it disburses in a given period)
Q: I’ve heard there’s a lot of cheap rental space available. Wouldn’t cheap rent be preferable to buying?
A: No. A surplus of affordable rental spaces does not promise stability for the nonprofit sector. While short-term leases may be favorable to nonprofits initially, when rental markets heat up, landlords begin increasing rents and canceling leases. During a down-cycle, organizations can be lulled into complacency as the tumultuous real estate market momentarily abates. This complacency may cause nonprofits to fall prey to classic market missteps, including the following:
- Delaying the purchase decision in exchange for low lease rates. A temporary surplus of low-cost rental space does not promise stability for the nonprofit sector. This is especially true when leases are short-term or mid-term. Few landlords offer long-term leases (55 years).
- Today, while certain neighborhoods in the Bay Area have a glut of available space, these areas are not necessarily where all the nonprofits want, or need, to be.
- Acting as if current trends will continue forever. A successful investor can forecast cycles and act ahead of the crowd, buying while popular opinion is still negative. An example of this is purchasing real estate when rents and prices are low, during a down-cycle.