Why Most Lenders Say No

Different Business Model: Merchant cash advances are designed for businesses that sell products or services daily. Nonprofits typically get money from donations, grants, and fundraising events - not regular sales.

Irregular Income: Lenders want to see consistent credit card processing. A nonprofit might have big fundraising events twice a year but very little card activity day-to-day.

Legal Structure: Many MCA lenders only work with for-profit businesses. Nonprofits have different tax status and legal protections that some lenders avoid.

When Nonprofits Might Qualify

Fee-for-Service Nonprofits: Some nonprofits operate more like businesses:

• Museums that charge admission
• Hospitals and medical centers
• Private schools with tuition payments
• Community centers with membership fees

These organizations process credit cards regularly and might qualify.

Real Examples

• The Community Theater sells tickets, snacks, and goods all year round.Processes $15,000 monthly in card sales. Got approved for a $25,000 advance to upgrade sound equipment.
• The Private School Collects tuition, lunch payments, and activity fees through credit cards. Strong monthly processing led to approval for building repairs.
• The Food Bank (Didn't Qualify) Relies mainly on donations and government funding. Very little credit card processing. No MCA lenders would work with them.

What Lenders Look For

Consistent Processing: At least $8,000-$10,000 monthly in credit card sales for several months.

Business-Like Operations: You sell something regularly (tickets, services, products) rather than just collecting donations.

Good Credit Card History: Few chargebacks, steady processing, growing or stable sales.

Alternatives for Nonprofits

Nonprofit-Specific Lenders: Some companies specialize in nonprofit funding and understand your unique situation.

Grant Bridge Loans: Short-term funding while waiting for approved grants to arrive.

Equipment Financing: Easier to get than cash advances if you're buying specific equipment.

Line of Credit: Some banks offer lines of credit specifically for nonprofits.

Before You Apply

Know Your Numbers

• Monthly credit card processing volume
• Average transaction size
• Seasonal patterns in your revenue

Have a Clear Purpose: Lenders want to see how the money will generate more card processing to pay them back.

Consider the cost: MCAs are expensive. Make sure the cost makes sense for your organization.

Funding Options for Non-Traditional Entities

Not every organization fits the typical "small business" mold. If you're a nonprofit, religious organization, club, or other non-traditional entity, getting funding can be tricky. Here's what's available.

Types of Non-Traditional Entities

Nonprofits and Charities: Churches, food banks, homeless shelters, community organizations

Religious Organizations: Churches, synagogues, mosques, religious schools

Membership Organizations: Country clubs, gyms, professional associations

Cooperatives: Credit unions, housing co-ops, worker cooperatives

Social Enterprises: Mission-driven businesses with social goals

Traditional Business Funding (Usually Not Available)

Most standard business loans and merchant cash advances don't work for non-traditional entities because:

• Different legal structures
• Irregular income patterns
• No "profit" motive
• Complex ownership structures

What Is Available

Nonprofit-Specific Lenders

Kiva Microfunds: Crowdfunded microloans up to $15,000 for nonprofits and social enterprises.

Community Development Financial Institutions (CDFIs): Local lenders that work with nonprofits and underserved communities.

Nonprofit Finance Fund: Provides loans and financial consulting specifically for nonprofits.

Grant Bridge Financing

What It Is: Short-term loans while waiting for approved grants 

Who Offers It: Specialized nonprofit lenders 

Typical Amount: $10,000 - $500,000 

Use Case: You've been awarded a $50,000 grant but won't receive it for 6 months

Equipment Financing

Available To: Most entity types 

What It Covers: Vehicles, computers, medical equipment, kitchen equipment Advantage: Equipment serves as collateral 

Example: Church buying a new van, clinic purchasing medical equipment

Revenue-Based Financing

Good For: Organizations with consistent revenue streams 

Examples:

• Private schools (tuition payments)
• Membership organizations (dues)
• Fee-for-service nonprofits

Lines of Credit

• Community Banks often work with local nonprofits and religious organizations 
• Credit Unions may offer better terms to member organizations
•  Specialized Banks like RSF Social Finance focus on mission-driven organizations

Entity-Specific Options

Religious Organizations

• Faith-Based Lenders: Organizations like Everence or Mennonite Foundation
• Denominational Funds: Many denominations have internal lending programs
• Building Funds: Specialized church construction and renovation loans

Cooperatives

• CoBank: Specializes in agricultural and rural cooperatives
• National Cooperative Bank: Focuses on cooperative businesses
• Shared Interest: Cooperative development loans

Social Enterprises

• l Impact investors: prioritize social and environmental gains.
• l B-Corp Lenders: Companies that understand hybrid business models
• l Social Impact Bonds: Performance-based contracts for social programs

Creative Funding Solutions

Peer-to-Peer Lending: Platforms like Kiva allow individuals to fund your organization directly.

Community Investment: Local supporters can make direct loans to your organization.

Revenue Sharing: Partner with businesses that benefit from your work.

Asset-Based Lending: Use property, equipment, or other assets as collateral.

What Lenders Look For

Consistent Cash Flow: Even if it comes from donations or grants, lenders want to see regular income.

Clear Mission: Organizations with focused, measurable goals are more attractive.

Professional Management: Board governance, financial controls, and professional staff matter.

Community Support: Local backing shows sustainability and reduces risk.

Before You Apply

Get Your Paperwork Ready

• IRS determination letter (for nonprofits)
• Financial statements
• Board resolutions
• Operating agreements

Know Your Options: Different lenders specialize in different entity types.

Consider Grants First, free: money is always better than borrowed money.

Build Relationships: Many alternative lenders want to know you personally.

The Bottom Line

Non-traditional entities have fewer funding options than regular businesses, but options do exist. The key is finding lenders who understand your structure and mission.

Start with organizations that specialize in your type of entity. They'll understand your unique challenges and be more likely to work with you.

What Now?

Most nonprofits can't get merchant cash advances because they don't fit the typical business model. But if your nonprofit operates more like a business with regular credit card sales, you might have options.

Focus on lenders who specifically work with nonprofits or have experience in your sector. They'll better understand your revenue model and be more likely to say yes.