Capital projects can span multiple years and cost millions of dollars. They require a significant amount of financial backing from several sources. On this page, we’ve outlined the options to consider when determining how you will pay for your capital project.
FINANCING & FUNDRAISING
Overview
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If you lack a high level of fundraising expertise within your organization or if you feel the need for an outside opinion, you may want to consider hiring a consultant to help you estimate what your fundraising capacity is and what specific steps you can take to begin improving it as needed. There are a number of foundations that provide money in the form of capacity building grants to help organizations assess and improve their ability to fundraise.
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There is a range of capital available to organizations. Funding all or part of your project with loans can often be very smart, particularly as a way to supplement your fundraising efforts and address timing issues of receiving capital contributions and grants. It can also be a useful strategy to spread the cost of a long-term asset over the period of time the building is being used, rather than trying to pay for the entire asset at once. The typical project requires a combination of several of these sources of funding:
Contributions raised through a capital campaign
In-kind contributions of goods and services
Government grants
Foundation and other grants
Loans, at taxable or tax-exempt interest rates
A financial consultant can help you identify the right types of capital for your project. If you are unable to hire someone, consider adding someone with financial expertise and background to your board of directors.
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The focus of this committee should be to help you define campaign messaging, establish new connections that align with your project goals and expand your donor network to include prospects that can contribute high value gifts. This committee is different from your development committee, which primarily concentrates on traditional and ongoing programmatic support for your organization.
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A financial model projects cash flow in and out of your organization before, during and after the project, and should forecast any need for short term financing. It typically includes a sources and uses budget and operating pro forma. Your financial model should begin at least one year before any work on the project or capital campaign starts (even before the beginning conceptual or schematic design), and it should end at least one year after the project is over. This way, you can clearly delineate the impact of your project on day-to-day operations.
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Ensuring your community understands the significance of your new building or facility is crucial. To help them visualize the project, find opportunities to share detailed plans from your architect and narratives from both program participants and staff, illustrating the potential impact of your project. If financial resources allow, consider creating a compelling video that encapsulates the essence of the project, or establishing a distinctive brand for your campaign. It’s important to consider how you will maintain interest and engagement with your donors throughout the project and for the long-term in order to build a lasting connection.
Expert Tips
Whitney Gustin Connor, Executive Director of Kids First Health Care
Kids First Health Care purchased the 4th floor of the Commerce City Community Campus (C4) and renovated the 6,200-square-foot space into a new clinic and administrative offices. The new clinic is a modern medical facility with twice the capacity to deliver medical and mental health services. Additionally, pediatric dental care is delivered next door by Kids in Need of Dentistry. Kids First's expanded administrative space also provides staff members with individual offices and group meeting rooms.
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Donors often make pledges that are payable in the future, sometimes over a period of years. If you wait until all of those pledges are “in the bank,” you will expose yourself to increasing costs of construction or acquisition. There may also be timing issues regarding the receipt of grants.
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Retaining some of that money will give your organization flexibility to respond to unforeseen events.
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Oftentimes, capital campaign pledges are made for a period of three, five or even ten years. Normally, however, the project can’t wait that long, and in fact will get more expensive with time. Therefore, the best alternative is usually to borrow money to fill the “gap” and get the project under way as soon as possible.
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Especially for small, rural nonprofits, community foundations may have the ability to connect you with capital or individual donors that can support your project.
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Diversifying your sources of funding can help you attract additional funders and investors and improve risk management. Remember though - with a more diverse capital stack, you have to be prepared to work with your funders in different ways. They will each want something unique to them.
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This is in direct conflict with the Association of Fundraising Professionals (AFP) code of ethics. While your fundraising consultant does not need to be an AFP member, you should get assurance that their contract will abide by AFP standards.
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A major construction project is a very tangible reminder to everyone of your vision for the future. Consider hosting a project groundbreaking to introduce capital campaign donors to your annual fundraising program and building your operational donor base for the future.
Guides
Downloadable resources to help you with financing and fundraising.
Links & Resources
COLORADO BASED FUNDS
Blackbaud: Explore tools, resources and products that help nonprofits with fundraising, CRM, analytics, financial management and more.
BRIC Loan Fund: The fund offers low-interest loans up to $50,000 to support capital projects or other improvements for Black-led and serving nonprofits across the seven-county Metro Denver region.
Colorado Creative Industries: Explore programs that provide funding, support and recognition for artists, creative business and organizations.
Colorado Educational and Cultural Facilities Authority: CECFA provides bond financing for educational institutions, as well as financing for cultural entities.
Colorado Enterprise Fund: A nonprofit CDFI small business lender that can help with gap funding.
Colorado Housing and Finance Authority: CHFA provides a long term, fixed interest rate combined with a low down payment requirement, creating the opportunity for nonprofits to acquire real estate. Eligible 501(c)3 entities may also qualify for tax exempt financing at below market fixed rates. Prospective borrowers should apply directly to CHFA.
Colorado State Historical Fund: Funds distributed competitively for restoration and preservation of buildings to be used for public benefit.
Community Development Block Grants: Federal dollars available through local government entities and the state Department of Local Affairs (for rural areas.). Uses of funds determined on a local basis and may include financing of nonprofit community facility development.
Denver Public Library Nonprofit Resource Center: Search the most comprehensive database of funders that support Colorado-based organizations.
Energy Outreach Colorado: The only nonprofit organization in the state that raises money through donations and foundation grants to help families in need pay energy bills and avoid shut offs.
HomeAid Colorado: Through partnerships with homebuilders and other nonprofit care providers serving the homeless population, HomeAid builds or renovates quality, respectable homes for Colorado’s temporarily homeless.
Impact Development Fund: A Community Development Financial Institution (CDFI) that connects organizations to flexible capital.
Latino Community Foundation of Colorado: A philanthropic foundation led by Latinos and for Latinos.
State of Colorado: Explore state agencies such as the Office of Economic Development and International Trade (OEDIT) and Behavioral Health Administration (BHA) that may have available capital related to your cause (ex: applying for behavioral health funds).
USDA Rural Development: Loans, loan guarantees and grants to nonprofit, tribes and public entities for community facilities in unincorporated rural areas, cities and towns with populations less than 20,000.
Urban Land Conservancy: ULC focuses on the development of permanently affordable space, ranging from early childhood education centers to multifamily affordable housing developments, through community land trusts.
NATIONAL FUNDS
Charter Schools Development Corporation (Building Block Fund): Nonprofit organization that assists charter schools with acquisition and financing of educational facilities.
CDFI Coalition: Provides information on community development financial institutions.
National Clearing House for Educational Facilities: Provides information on planning, designing, funding, building, improving and maintaining safe, healthy, high performance schools.
Nonprofit Finance Fund: Provides capital and advice to help nonprofit organizations achieve their mission, improve their capacity to deliver services and strengthen their communities.
Reinvestment Fund: TRF builds wealth and opportunity for low-wealth people and places through the promotion of socially and environmentally responsible development.
FUNDRAISING RESOURCES
Bonterra: Provides fundraising, engagement and management software for nonprofits, foundations, public agencies and corporations.
MOVES Management: A progressive fundraising methodology that manages, tracks, and prioritizes prospects as they are identified, researched, cultivated, asked and recognized. It should result in a higher probability that the person will give when asked. “Cold calls” rarely work for capital contributions.