Can Nonprofits Get Merchant Cash Advances?
Why Most Lenders Say No
The short answer is: it’s complicated. Most merchant cash advance (MCA) providers don’t work with nonprofits, though there are exceptions. Here’s why nonprofits are often excluded:
- Different business model: MCAs are designed for businesses with regular daily sales. Nonprofits typically rely on donations, grants, and events.
- Irregular income: Lenders prefer consistent credit card processing. A nonprofit with only a few fundraising events may not meet this standard.
- Legal structure: Many MCA providers only work with for-profit businesses due to tax and legal complexities.
When Nonprofits Might Qualify
Some nonprofits operate like businesses and process credit card transactions regularly. These include:
- Museums with paid admission
- Hospitals or medical centers
- Private schools that collect tuition
- Community centers with membership fees
Real Examples
- Community Theater: Sells tickets and concessions year-round, processes $15,000 monthly in card sales, and received a $25,000 advance for sound system upgrades.
- Private School: Collects tuition and fees via credit cards and secured funding for building repairs.
- Food Bank: Relied mostly on donations and government funding; did not qualify due to minimal card processing.
What Lenders Look For
- At least $8,000–$10,000 in consistent monthly credit card sales
- Business-like operations with regular product or service sales
- Strong credit card history with few chargebacks and steady or growing sales
Alternatives for Nonprofits
- Nonprofit-specific lenders: Some organizations specialize in lending to nonprofits and understand their unique needs.
- Grant bridge loans: Short-term funding while waiting for grants to disburse.
- Equipment financing: Easier to qualify for when purchasing specific assets.
- Lines of credit: Certain banks and credit unions offer nonprofit-focused credit lines.
Before You Apply
- Know your numbers: Monthly card volume, average transaction size, and seasonal trends
- Have a clear purpose: Explain how the funds will increase card-based revenue
- Understand the cost: MCAs are expensive—ensure the ROI justifies the cost
Funding Options for Non-Traditional Entities
Nonprofits, religious groups, and other non-traditional organizations have different funding options than standard businesses. Here’s what’s available:
Types of Non-Traditional Entities
- Nonprofits and charities
- Religious organizations (churches, mosques, synagogues)
- Membership organizations (gyms, clubs, associations)
- Cooperatives (credit unions, housing co-ops)
- Social enterprises (mission-driven businesses)
Why Traditional Business Funding Is Often Unavailable
- Legal and structural differences
- Irregular or seasonal income
- Lack of profit motive
- Complex ownership or governance
What Is Available
Nonprofit-Specific Lenders
- Kiva Microfunds: Crowdfunded microloans up to $15,000
- CDFIs: Community lenders that serve nonprofits and underserved groups
- Nonprofit Finance Fund: Offers loans and financial consulting
Grant Bridge Financing
- What it is: Short-term funding while waiting for grant money
- Typical amount: $10,000 to $500,000
Equipment Financing
- Who qualifies: Most nonprofit or community-based organizations
- What it covers: Vehicles, computers, medical or kitchen equipment
- Advantage: Asset serves as collateral
Revenue-Based Financing
- Ideal for organizations with steady income like tuition or membership fees
Lines of Credit
- Community banks and credit unions may offer tailored options
- Specialized banks like RSF Social Finance focus on mission-aligned lending
Entity-Specific Options
Religious Organizations
- Faith-based lenders (e.g., Everence, Mennonite Foundation)
- Denominational loan programs
- Church construction and renovation loans
Cooperatives
- CoBank (agriculture and rural co-ops)
- National Cooperative Bank
- Shared Interest (co-op development funding)
Social Enterprises
- Impact investors who prioritize social outcomes
- B-Corp-friendly lenders
- Social impact bonds (pay-for-success contracts)
Creative Funding Solutions
- Peer-to-peer lending: Platforms like Kiva let individuals lend to your nonprofit
- Community investment: Local supporters can provide direct funding
- Revenue sharing: Partner with for-profits to share revenue in return for support
- Asset-based lending: Use equipment or property as collateral
What Lenders Look For
- Consistent cash flow—even if it’s from grants or donations
- A clear, measurable mission
- Professional governance and financial management
- Strong community backing
Before You Apply
- Prepare documents like IRS determination letters, financials, and board resolutions
- Match your needs with the right lender or program
- Explore grants first—they don’t need to be repaid
- Build relationships—many lenders value personal connections
The Bottom Line
While most nonprofits don’t qualify for merchant cash advances, funding options do exist. The key is finding lenders who understand your mission, revenue model, and structure. Start with nonprofit-focused organizations—they’re more likely to meet your needs and say yes.
What Now?
If your nonprofit operates more like a business with steady card sales, you might qualify for an MCA. Otherwise, focus on nonprofit-friendly lenders, grant bridge loans, equipment financing, or lines of credit. Explore every option and choose the one that best supports your goals and values.