Meadow: Welcome to the first video in Nonprofit Finance Fund’s series: Understanding NFF’s Lending Process. In this video, we share what kind of information might be exchanged in an initial conversation with the NFF lending team.

Here is a broad overview of the steps in NFF’s lending process. We are going to assume you have already identified NFF as a potential lender. First, you will need to fill out our Loan Intake Form, which is available on our website or through the link in the video description. After you fill out the form, if your needs fit the kinds of loans we offer and your organization meets our minimum requirements to be considered for a loan, then a member of NFF’s Loan Origination team will reach out to you to set up an in initial conversation.

You’ll be working together, lender & borrower, over several months to close the loan, and then for however long the term of your loan is post-closing. Since this has the potential to be a long relationship, both you AND NFF will need to make sure the loan and relationship are a good fit. This initial conversation is the first step in making that determination together.

More specifically, you, as the borrower, will want to know about pricing and structure of the loan so you can decide if this is right for your organization. You are trying to answer:

• How do NFF’s costs compare to others you are exploring?
• What are the payment terms? This includes interest rate and relevant loan fees as well as the size & frequency of payments and the term length.
• Can your organization afford the loan based on those terms?
• What type of collateral, guarantees, or reserves are required?
• Does NFF understand your situation and are they willing to work with parameters that you have, like specific timelines or amounts?
• What happens if we run into challenges or fall behind on payments?

And on the other side, NFF needs to understand what your financing need is for the loan you seek, and whether one of our loan products fit that need. If we think it might, then we will need to gather additional information from you to be able to move to the next stage in the process. At NFF, we send you a Due Diligence Checklist that lists what additional information we need, you send us that info, and we do our initial analysis to decide how to move forward.

It’s important to know that NFF having a loan product that fits your needs is not the same as approval. NFF still needs to complete its underwriting process, where we assess your organization’s ability to take on new debt and manage repayment of the loan. Part of what we are trying to determine in the intake call is what are the potential obstacles we might face during underwriting, and do we have ways to work through those challenges. One thing we don’t want to do is to start that process (which can be time-intensive for everyone) if there isn’t a viable path to get across the finish line to approval. It wouldn’t be a good use of either your time or ours.

The timeline of these initial conversations largely depends on how long it takes to get all the due diligence documents together. This can be a big ask and a lot of work, so we recommend watching our What Lenders Look For video to make sure you’re prepared.

Now let’s see what this might look like in practice. Meet Sal, the Director of Finance for ABC, a workforce development nonprofit. ABC was approved for a new, large government contract this year. Since this contract is reimbursement-based, ABC must pay for expenses up front before they get reimbursed. Sal worked with his Executive Director and Board to determine they need a loan to help them manage expenses for this contract. Sal has already reached out to his local bank, where ABC has an established relationship, but was told he doesn’t qualify for a loan through them. So now he’s exploring a couple of other lenders, including NFF.

And this is Brittany, a Loan Originator here at NFF. She’s part of the team that helps organizations figure out whether our loan products might support their work. Brittany has reviewed ABC’s intake form, so she has a sense of their mission and financial picture.

The goal of this conversation is for them both to make an initial assessment about whether this is a good fit for both parties. Sal is trying to figure out how the cost of a loan through NFF compares to other lenders, and if ABC can afford one through NFF. Brittany is trying to understand how NFF can support ABC with a loan, including what type of loan might be a fit if they are a good candidate. Sal & Brittany just got on a call about ten minutes ago.

Before we drop you into the middle of their conversation, here are a few important things to know: This is not a call to get approval or even pre-approval. It’s simply a chance to understand ABC’s goals, impact, and financing needs — and to see whether an NFF loan might be a fit. This is a two-way relationship-building conversation. Both Sal and Brittany are starting to figure out whether a long-term partnership feels right — because loans aren’t just transactions; they’re ongoing relationships. This is also the safest place to ask every question, big or small. No one is expected to come in knowing lending jargon or processes.

They’ve introduced themselves, shared some background, and now Brittany has asked Sal what his questions are. Okay, let’s join them mid-conversation.

Brittany: Sal, thanks for walking me through ABC’s mission and the communities you serve. Hearing the real impact behind your work — not just the numbers — helps me understand what’s at stake and what you’re trying to make possible with this financing. That’s always where we start at NFF.

Just to set the tone here — this call isn’t any kind of pre-approval or decision point. Think of it as a “mutual fit” conversation. You’re learning about us, we’re learning about you, and together we’re figuring out whether an NFF loan could be supportive for ABC. No pressure either way.

And with that, I want to make sure we leave plenty of room for your questions. What’s top of mind for you right now?

Sal: Great, thanks Brittany. I’ll start by asking the question that is most top-of-mind for me right now: What are your current interest rates and fees for a loan?

Brittany: I appreciate you getting right to the point — it’s important for organizations to understand the full cost of capital upfront.

As a non-profit mission-driven lender, NFF offers the lowest fixed rates we can, given the capital we have available to lend. Interest rates and fees vary depending on the loan type and term, so once I have a clearer picture of ABC’s needs, I can give you more tailored numbers.

I can also send you our indicative rates at the end of the call, but please know we won’t lock our interest rate until we execute a term sheet, which comes a little later in the lending process. In terms of other costs, NFF charges an origination fee between 1% and 1.25% based on the size of the loan. We also have a modest legal fee to help cover the cost of drafting the loan documents.

Sal: Okay, this is roughly what I was expecting based on conversations I’m having with other lenders. I think we need a line of credit, but I know NFF offers other types of loans too. Do you think a line of credit is what we need? Or perhaps a bridge loan?

Brittany: From what you’ve shared — that ABC has a government contract where you pay expenses upfront and wait for reimbursement — yes, that usually points to a line of credit.

We’d consider a bridge loan if it were truly a one-time need, upfront need just to kick things off (e.g. to hire new staff or make upfront investments as they ramp up a new program if covered by the contract). But in ABC’s case, your contracts require monthly invoicing and tend to impact cash flow needs. In this case, your financial need is likely better suited to a line of credit.

Sal: Okay, thank you for clarifying that difference. Can you share anything that will be helpful for me to know about the terms and structure of a line of credit?

Brittany: Of course. Our lines of credit typically have a one-year term, but we can discuss including two optional annual renewals. The amount you can borrow is based on 80% of the money owed to you that is less than 90 days old. We also require a 30-day clean up period, which means you must bring the loan balance to $0 for 30 consecutive days once every 12 months. The clean-up helps us make sure the loan is helping smooth timing issues, not becoming permanent operating debt.

Sal: Got it. Just so I’m clear, a Line of Credit does not necessarily give us access to that line indefinitely, right?

Brittany: Right. That is one difference between a LOC and a credit card. A line of credit is intended to solve for a temporary and short-term timing difference between when you receive revenues and when you have to pay expenses. You can ask to renew a line of credit, but that is a whole new process. This is different from a credit card, which typically stays open as long as you’re using it.

Sal: Ok, understood, and thanks for clarifying that!

Brittany: I noticed on your intake form that you secured additional reimbursable contracts this year. Understanding how and when your reimbursements come in helps us think through the loan structure and amount. Can you tell me how those contract payments are earned? And how long do you expect it will take to receive reimbursement?

Sal: The contract is for three years, and we can submit our expenses for reimbursement once per month. The contract says we’ll be reimbursed within 30 days, but in our experience it often takes closer to 60 days. With our existing contracts, we have been using our cash reserves to cover expenses while we waited for reimbursements. But with this new, increased contract, we do not expect to have enough cash to cover the contract expenses while we wait for reimbursement.

Brittany: Got it. That context is really helpful. When do you anticipate needing the line of credit?

Sal: We are planning now and want to start in four months. We’ve crunched the numbers and estimate that we will would need to access to a $1.5M line of credit to ensure we have the cash we need to pay for expenses related to this increased government contract, as well as all other operating expenses, before reimbursement payments come in.

Brittany: Thanks for the context. The next step would be for me to send you our initial due diligence checklist — things like recent audits, monthly cash flow projections, aging receivables report, governance info, and a few other pieces that help us understand your full financial picture.

Sal: We do not do monthly cash flow projections, only quarterly. Is that going to be a problem? If so, is that something we can work on now?

Brittany: You definitely need monthly cashflow projections before we can move forward. I’m happy to send a template and walk you through it or point you to helpful videos if that makes it easier.

Sal: Yes, that would be great if you could send over that template and resources. I will work on this with our Executive Director and our Board’s Finance Committee.

Brittany: Of course. And before we wrap up, I want to learn a little more about ABCs governance and leadership structure – things like how your board and management team make financial decisions. That helps us understand how you operate and whether this financing fits into the way you already manage sustainability.

Meadow: Sal and Brittany talked for a while longer; they both probably had more questions. Brittany hears this phase all the time… “This might be a silly question…” and we’re always, always happy to hear those questions! It’s 1000x better to ask questions to understand everything thoroughly early on than to miss or misunderstand something important that could disrupt the process later on. When you don’t understand an answer, you can always ask the question again, or paraphrase the answer back. Really whatever you need to do to get the information you need to make an informed decision.

We hope this helped prepare you for your initial lending conversations. If you have more questions or want to learn about the next step, please check out the other videos in our series below.