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Canada’s non-profit sector invents a solution to gaps in funding
The recession hit Canada’s non-profit sector hard. Demand surged. Donations shrank. Foundations suspended grants to protect their endowments. Government support held up for a time as Ottawa and the provinces poured money into the moribund economy, then it too was cut.
Some charities folded. Others hunkered down, laid off dedicated workers and placed a heavy load on their volunteers. They served their clients as well as they could, but had to turn away people who came seeking help.
Innovative non-profit organizations shelved groundbreaking projects and went into survival mode.
Nora Sobolov, who was chief executive of the Canadian Lung Association at the time, remembers receiving a distraught phone call from a colleague in 2009. He was worried about making his organization’s payroll because the money he was expecting for a government contract had been delayed. When he asked his bank of 15 years for a bridge loan, he was turned down flat.
Then she got a call from another friend. Her arts organization had found an interested corporate sponsor, but it needed a bit of capital to get artists started. No one would give her a loan.
Sobolov kept hearing similar stories, watching the growth of non-profit lending in the United States and Britain and brainstorming with others who shared her concern — at credit unions, co-operatives, social enterprises and other non-profit organizations — about creating a funding mechanism that would link Canadians willing to make a modest investment in their community with non-profit organizations that needed short-term help.
It wouldn’t — couldn’t — provide a sustainable income to chronically troubled charities. Its purpose would be to prevent temporary financial shortfalls from becoming life-threatening crises.
“We were just trying to fill one gap,” Sobolov says. “The (non-profit) sector needs a whole range of financing alternatives.”
She had the vision, the contacts and the qualifications (a law degree and social work degree) but Sobolov stresses that it was a collective effort. She sought help from bankers, securities experts, community leaders, the directors of the Nonprofit Finance Fund in the U.S. and CAF Venturesome in Britain. She tapped into the experience of Vancity and the Edmonton Social Enterprise Fund, which make non-profit loans on a regional basis. And she worked with Imagine Canada
The first step from blueprint to reality was a feasibility study to make sure there was a demand for the service. Sobolov and researcher Arlene Wortsman met the leaders of 100 non-profit organizations and confirmed that the need was real. The second step was to approach foundations looking for creative ways to use their endowments and other potential investors.
It took another two years of work — painstaking legal work — to build Canada’s first non-profit lending institution. This spring the last hurdle was cleared. CCF won the approval of the Ontario Security Commission.
To celebrate, the CFF invited everyone who had been involved in its creation to a kickoff in Toronto. The event didn’t attract much public attention but for the voluntary community it was a breakthrough; one Sobolov hopes will mark the beginning of a “rethinking of the way we finance the non-profit sector.”
There will always be a need for government support, individual and corporate donations and grants from foundations, she says. But there have to be other options: fee for service activities, revenue-generating acquisitions, partnerships with private financiers and many more.
Since the launch, the CFF has approved two loans; one to an environmental organization that wanted to cut costs by installing a solar panel, the other to an artists’ group that needed exhibit space. Thirty-three applications are in the pipeline.
To qualify for a loan, a non-profit organization must be registered with the Canada Revenue Agency, have a strong business plan, share its financial records and have a substantial stream ($350,000 annually).
At the moment, there is $7 million in the fund. The goal is $20 million.
“Some people would call it a drop in the bucket,” Sobolov says. “But what a drop.”
Carol Goar's column appears Monday, Wednesday and Friday.
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