2020 was a year that demanded innovation and quick action. In April, many nonprofits were facing significant and sudden cash flow challenges due to loss of revenue and increased demand for services. They needed to make significant decisions quickly, and without a lot of clarity as to what the next three to twelve months were going to look like. The Community Foundation responded by developing the Line of Credit Guarantee Program. This program allowed nonprofit organizations that served the greater Holland/Zeeland area, and had a 2019 operating budget in excess of $500,000, to apply for a CFHZ guaranteed line of credit established through West Michigan Community Bank.
CFHZ staff found inspiration for this creative new program after reading an article by consulting firm FSG that challenged foundations to think beyond traditional grantmaking and make it easier to deploy their asset base to help their nonprofit partners meet an unprecedented crisis. After gathering feedback from key community partners, the Line of Credit Guarantee (LOC) Program was established, adding another way for nonprofit partners to navigate financial challenges caused by the COVID-19 pandemic.
“We launched this program as a way to further leverage our Community’s Endowment assets to support some of our mid-to-large nonprofit partners and preserve critical community capacity in this time of extraordinary need,” said Mike Goorhouse, President/CEO.
The LOC program gave nonprofit partners quick access to capital without the need to go through the traditional underwriting process or use their own collateral for a line of credit or loan. It also provided flexible working capital, which gave nonprofit organizations time and flexibility to function at a higher capacity as they navigated loss of revenue and/or increased need for services. This flexibility was particularly helpful as many organizations were re-working how they delivered services, embracing new service roles they had not had to fill in the past, and still needed time to gain a better sense of their financial picture in the coming months.
The partnership between CFHZ and West Michigan Community Bank in offering the LOC program eased the burden on organizations to access this kind of tool. In total, eleven organizations were accepted to the program for a total of $1.7 million in guaranteed lines of credit.
One of those participating nonprofits was the Tulip Time Festival. Executive Director Gwen Auwerda said, “The pandemic caused a ripple effect of impacts on Tulip Time. We were forced to cancel the festival in March, and typically our two highest income months are April and May. This loss of revenue resulted in a layoff of more than half our staff. We also lacked the available cash to manage the volume of ticket refund requests, as only a small portion of our guests chose to turn their ticket purchase into a donation.”
The Community Foundation’s Line of Credit was a lifeline during tough times, allowing us to compensate our remaining staff, pay our rent, and manage the ticket refunds. Tulip Time wouldn’t be here today without the outpouring of support from the community, including CFHZ, who rallied around us and recognized the value of the festival.”
This article originally appeared in the CFHZ 2020 Annual Report.